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I'm your host Tony Edward and joining me today is Frank Holmes who is the co-founder of Hive Blockchain Technologies, the CEO and CIO of Macro Global Investors. This is not Frank's first time on the pod. Frank, it's great to see you again. It's great to be with you, especially when we get a relief Bitcoin rally. We get a relief in the streets of Hermoz and we get a nice rally in Bitcoin. Absolutely. Bitcoin trading around $73,000. So do you expect this relief rally to continue, Frank? Well, when we look at previous downdrafts from disasters like October the 10th that took place with Biffinex with an algo blowout, and that really capitulate $19 billion of selling, of collateral damage, that spooks markets. historically when we've seen these things they fall up to 80 percent so this one's like 52 percent and i think that the bottom is here and i think a big part is the growth of etfs in the past year sort of buffers that type of decline that that all of a sudden people become uh bottom fishers they come out they look for bottoms they think it's bottom whereas before we had a very small Bitcoin ecosystem and now has grown dramatically. Absolutely. And an example would be like the BlackRock Bitcoin ETF, the Ibit. Even though there have been small outflows during this downturn, the majority of the holdings is still there, Frank, right? Just sitting there, unlike anything we've seen in the past bear markets. Yes. And it's absorbed when you look at Russia, China, China mining again, but that's predominantly for the government, and Iran. The collections of the three grew to about 30% of the world's Bitcoin mining hashing power index. So they are blowing out all to get US dollars that are Bitcoin. And that really sort of accelerated, I think, some of this decline, but it was well absorbed, this supply coming from these three countries. Yeah. And, and freak it's, we know there's almost, I guess now it's less than 1 million Bitcoin left to be mined. Um, just recently it hit that 1 million number mark, but folks have been mining since then, including hive. And we have another a hundred years, which is, you know, when you try to think about it, it's kind of crazy, but that's how the algorithm is programmed. So do you believe there's going to be more competition to mine Bitcoin from nation States and even energy companies and things like that? I think the global network, a decentralized network, is very significant, especially in a turmoil world. And we're seeing this in Iran. You know, this is a classic where they had a central command, but they broke out into 32 different areas, bases around the country, so that the central command got killed, that the other ones could all of a sudden operate at their own will. And that's made it more challenging, even taking out the central core. So you can see that in war and you can see that the importance of the Bitcoin network is so global, so decentralized, that it's like watching those Star Trek movies where the force shield gets hit and it bends in and it comes right back out. It bends in and comes right back out. So I think that that's what we're living with in the Bitcoin ecosystem. And I think that all these data centers that are focused as tier one data centers in the ecosystem, they will want to become very important for moving capital around the world. Absolutely. And the next Bitcoin halving is in April 2028. Is it too early to answer this question, but I'm curious how Hive is preparing for that and as the difficulty increases and so forth? Well, it's an ongoing question because when we look at ASIC chips, they do have a declining value. And the only way to resuscitate an old chip is to get cheap electricity. And usually you have to get government subsidized electricity to get that cheap two cent electricity. So Bitcoin itself, you have to always be investing in new technology. and we don't like this binge buying. We're always buying and upgrading our chips. So that's been our strategy. And I think I've learned this from in South Texas fracking. So you can hit a well and you get 1,000 barrels a day, but a year later, it's only 100. So you have to maintain that continuous drilling to maintain that 1,000 barrels a day and to maintain your efficiency where what we witnessed was really incredible that the ASIC chips were originally almost like 300 joules per second consumption of electricity, and now they're pushing 10 and 11. So you've seen Moore's Law basically show up in the ASIC chips. And so will they get down to five or six joules per second? So what we've been doing is just buying some of the new ones that have very low consumption of electricity. and during this past quarter it's been really difficult if you've noticed that most of the bitcoin miners have stopped giving you their monthly production uh because we had a freeze in north america we had a heat wave in the southern hemisphere so we had all these sort of outages and you also had the difficulty rising uh and so what we found we had to do was retool our firmware so that we could become more energy efficient because hot does function over nine time zones, five languages, and three continents. So we still drive every day to meet are we being efficient. Every morning we meet around the world to make sure what machines are plugged in, plugged out and when is the delivery of a hundred new Bitmain machines coming in Pardon the interruption Hi I Tony I the host of the Thinking Crypto podcast I wanted to ask you if you can please support the podcast by hitting the like button subscribing if you haven as yet You can leave a comment below as well. And if you're listening on a podcast platform such as Spotify, Apple, or wherever you get your podcasts, please be sure to follow and hit the five-star rating. I'll let you get back to the content. Thank you so much. And are you leveraging AI in any way during the mining process? Well, you know, when we first launched Hive, being the first crypto mining company, it was really originally GPU chips we're using from AMD and we were mining Ethereum. And at one time we became 6% of that network. So we understood GPU chips are much more like driving a Lamborghini Ferrari than a ASIC chip is like a Bronco or a Jeep in the difficulty. So we became quite skilled on it. And in 22, we started to pivot away to buy NVIDIA chips to mine Ethereum until Ethereum went away. And we started going into AI. So in fact, we're the first to really go into AI. And now we have a run rate pushing about 3 million a month. And we see that that will scale another five fold this year on the transformation. And the other big learning curve has been a tier one data center costs you about a million dollars of megawatt with your ASIC machines in them. When you go to tier three, which NVIDIA likes to call an AI factory, which I totally agree with this concept, you're talking about $33 million per megawatt. It's 33 times more expensive. So some of the companies say they're jumping into it and they're partnering with hyperscalers to go use and repurpose their centers, I think that's great. What I'm going to share with you is that it's much more difficult to build those tier three data centers. Just the air conditioning is 40% of the electricity, and there's a big backlog of 50 weeks to get a lot of the HVAC equipment. So it's not so fast like getting an ant miner showing up at the door, and it takes us six hours to unwrap the plastic, plug it in, and is mining. When we get a chip that's GPU chip, it takes you six weeks to get it working. It's so sensitive. It's like, like I said earlier, a Lamborghini or Bugatti going over a bumpy road and you need a wheel alignment right away. The GPU chips are much more air conditioning consumed because you've built a brain and the cost for overall running them. So we know what we're doing in that end of it, and we're really excited about what we've been able to show that tier one data centers transform into tier three data centers faster than starting from scratch for a tier three data center. And that's what we've seen in America. And we've seen this in Canada. And we've seen in Abilene, Texas, where they were sourcing classic Bitcoin miners sourcing surplus electricity power from solar, from wind and flare gas. Now it's a $500 billion spend for chat GPT because they secure the energy and the land. So if you're in the data center business and you're in the AI factory building, you have to go and source electricity, then the land. And who did it first? Bitcoin miners. So Bitcoin miners are all of a sudden going through a new generational leap of going into the AI infrastructure build out. In particular, these concept of AI factories. The reason why I say that is that most data centers report it to the CFO. And the CFO always wants to drive down costs. Starting a business can be overwhelming. You're juggling multiple roles, designer, marketer, logistics manager, all while bringing your vision to life. Shopify helps millions of business sell online. Build fast with templates and AI descriptions and photos, inventory and shipping. Sign up for your one euro per month trial and start selling today at Shopify.nl. That's Shopify.nl. It's time to see what you can accomplish with Shopify by your side. Today, you're seeing that the AI Factors reported the CEO who wants to use it to drive revenue and to drive cash flow. So the mindset is totally different. And so that's what Hive is basically has been this twin engines to monetize the same megawatts through different cycles. ASICs produce institutional grade horsepower. And that's the other part we found is that we don't have an ATM machine in a data center spitting out little gold bitcoins. It's just like I can't believe sometimes these government agencies think this. We sell hashing power to Foundry, which is SOX 1 and 2 compliant in America, and they then pay us in uncirculated or virgin Bitcoin. When it comes to AI, we sell our computational power to users that run their big language, large language models, and they pay us in U.S. dollars. There's really none of that data or Bitcoin is in our data center or in our wallet near our facility. It's always done in the cyber world. It's very fascinating, Frank. To your point, Bitcoin miners were the pioneers in having this dual model, if you want to call that, right? The Bitcoin mining operation side of the business and now AI data center support type of side of the business. Is this the model moving forward, you know, as AI is becoming more prominent, obviously, as part of our economy and so forth? Oh, there's no doubt. And the other part I share with you, a lot of government policymakers and agencies, they think that this streaming is free. They think that Netflix is free. YouTube is free. It just doesn't happen without data centers. And what we're also witnessing is the huge spend in military for sovereign security by nation by nation. So when you look at the NATO spend in the past few years and you take a look at America, that when they went in under Ronald Reagan to go after Noriega in Panama, 23 American soldiers were killed. Going after Maduro, not one. Why is that? Well, it's about AI, and it's about the synchronization of AI with a satellite, with an aircraft carrier, with an F-15, with a helicopter, and with special forces and soldiers. I was reading that they were able to find one of the pilots that was lost in Iran last week. They can detect a heartbeat 40 miles away. Wow. That's AI. And so we just have to recognize that it's going to be a game changer for MRI, for looking for cancer. It's going to help us to live longer. How they analyze blood tests in addition to national security issues and concerns. It's really a significant game changer. So I feel excited that we're helping humanity when we think of what we're building out and transforming Bitcoin data centers. not all of them, but several of our data centers into sovereign data centers, in particular in Canada. On the border of Maine and New Brunswick, it's 70 megawatts will become 50 megawatts of high-performance compute. And then in Toronto, we have other assets which work in the transformation. And in northern Sweden, we're going through another transformation of a Bitcoin mining facility to go into high-performance compute. And I read on Hive's website some major news items I think some of you alluded to just recently, where Hive reaches an AI cloud milestone in Paraguay, the expansion of the data center footprint in British Columbia. AMC Robots and Hive announced a collaboration to advance AI-driven robotics compute infrastructure. You guys are doing a lot. We are. And when you look at a simple, small, new NASDAQ company, I think they were spending a million dollars a month on accessing those types of NVIDIA chips we talked about. Uh, so for us to go and get that business directly, you know, we have built it up to about 10,000 customers in 80 countries are renting our, our power, our, our sort of, I would call that compute power because we take electrons and run them through uh these GPU chips and someone renting that it really quite significant So I really thrilled that Hibis as I mentioned earlier a dual-engine digital infrastructure platform, which is converting low-cost clean power into two institutional products, virgin Bitcoin from SOC 2, 1 and 2 U.S. audited pool, and then contracting with our GPU chips for our compute partners sold in dollars and multi-year terms. Sometimes people will rent for a week from us and other times they can rent for a year. So we're very excited. And what we partner with in Canada in particular is Bell Canada, which is the largest telecom. And they've done an incredible 180 pivot into this concept of AI factories from having a data center expense to now generating revenue. And so we're their strategic partner in Canada in this conversion. And we're using some of their data centers as fast as they're up. We're putting in our GPU chips to get them running and generate compute power. Frank, there's been a lot of talks about quantum computing as a threat to Bitcoin, Bitcoin mining, and potentially to the AI side of the business as well. Is this simply a narrative? You know, maybe short sellers are pushing this narrative because they want prices, that go down, of course. Or is there a little bit of a threat and companies like yours, like Haas, will eventually upgrade the equipment to have quantum-resistant technology and things like that? I think it's early to say we jump into a quant, that technology is very early. It's evolving quickly. It's just the same as saying that AI is all the negative narrative so often is always negative, negative. When I watch all the guys shorting the stocks and coming out on CNBC, why it's a bubble, not recognizing that Anthropic comes out with a run rate of $30 billion. That's an incredible growth. And we look at ChatGPT, how fast it grew to a billion dollars a month in revenue. So it's a big super cycle. And I think that quantum will come along. I think it's very, very premature. It's extremely expensive to do what it's going to do. But I think if you think about NVIDIA in particular, NVIDIA was a gaming company. It made chips for gamers. And their real inflection point was 2010 when they started focusing on taking those GPU chips for AI. And so now, where are we today? We're 2026. So we're talking about 16 years later. So when we talk about quantum, it's like it's going to be tomorrow. Well, it's just not true. It's a long way off. And how things will evolve, Hive has so far shown it's been able to go through two halvings, pivot, have the first AI platform where we're generating high margin revenue ourselves. And now we're scaling that business. Like last year, we scaled our Bitcoin 400% our revenue and cash flow. And now we're going to scale the HPC business. We're in a nice position for growth. Yeah, absolutely. And I've been telling a lot of people, I feel like this is just narratives being pushed. Where was this narrative before Bitcoin went to $126 last year? All of a sudden, the price starts going down, and they're pushing this quantum narrative very strongly. Yes, it's always looking for something negative. And AI, like I said, has been around for hedge funds. They've been using it for a long time. The number one professional-performing hedge fund in the world, a mathematician, was using these GPU chips, Jim Simmons, for Renaissance technology. And no one's ever come close to his returns of what he generated for investors. So I think that the evolution for everyone to grasp is the fact that we got open chat a few years back. And that was the wake-up call to, wow, this is quite incredible. And I use all four of them. I use Perplexity. I use Brock. I use Clone. And I use ChatGPT. And they're all different. They all give you different information and nuances. And the biggest thing I share with the listeners, you really have to dig down with the quality of your prompt, the depth and breadth of your prompt. And I sometimes find myself writing an essay of 250 words in a prompt so that I can get great data coming out of it. And then I was reading that a person that created CLAW, which was really highlighted by Jensen at his big conference a couple of weeks back. was basically a self-taught coder from Vienna. And he changes the whole world that you don't have to know how to code these five languages. You have to know how to write a language that is English, Spanish. You just got to be able to type in a great prompt and it will then turn around and start in that language you want. If you want it in Python, it will all of a sudden create a whole compliance system, a whole sales and marketing system for you in Python. But before you had to go hire a $300,000 Python coder. Now you and I can do it. That is a game changer. Yeah, it's incredible. The amount of power you have at your fingertips with these AI programs and so forth. Yeah, so it's very, very exciting to be part of this change for humanity, the infrastructure that we're putting in around the world. Absolutely. Frank, here in the United States, we are trying to get crypto legislation passed. It's being held up a bit, you know, with the banks are fighting back on stablecoin yield, but it seems like we're going to get something potentially this year. What impact do you think this has on the adoption of Bitcoin and the growth of the Bitcoin mining industry that we have the guardrails in place. And not necessarily that Bitcoin needs much of that, but rather to allow more capital and innovation to happen. Well, there's a tension between what is a macro phenomena and what is micro. So when I talk about micro, it's specifically your question in America. But if you're in the beltway in DC, you have to wrestle with, China has weaponized gold as an alternative asset class and to de-dollarize and get petro dollars to be converted into Chinese yuan as they buy more gold to say we're legitimate. There's this big battle. And what you've seen now is the Chinese have invested or loaned 75% of the United Nations countries. there's 193 countries in the united nations they have invested in 150 of them so their tentacles are into don't trade in dollars so along comes this incredible company called tether that shows you that people in emerging markets they want to own u.s dollars and that's a stable coin system no americans own it no europeans own it but it grows to a population of about 400 million wallets It trades that it's the most profitable group of software coders you could think of. I mean, we're talking $13 billion of profits for the 175 employees. It's really quite amazing. And what I think Washington is looking to try to do is to embrace this technology, to embrace the stablecoin, because they want the rest of the world to own U.S. dollars, because it helps fund all the deficits, and it helps fund liquidity around the world. Starting a business can be overwhelming. You're juggling multiple roles, designer, marketer, logistics manager, all while bringing your vision to life. Shopify helps millions of business sell online. Build fast with templates and AI descriptions and photos, inventory and shipping. Sign up for your one euro per month trial and start selling today at shopify.nl. That's shopify.nl. It's time to see what you can accomplish with Shopify by your side. And so we are going with some of the big money center banks trying to stop this because they're worried about money market funds would leave the banks and then go to this stable coin paying rewards or a coupon. And that's your battle that's going to take place. But I think the macro dynamic is probably more significant of pushing back the banks of saying, you know what we going to pay it because strangely enough the Chinese came out with their stable coin and they paying rewards They doing everything to undermine the global network of trading in U dollars And so that is the macro thesis where Tether shows it works. They also have a very successful gold stable coin. It's really profound how much it's grown in significance. And so I think the U.S. government wants to have their stable coin and to be able to pay those rewards. And that means that U.S. dollar is able to continue to be the dominant, keep rates lower. Some people believe that masks inflation. if we go to the basket of inflation that came out this past week, if you looked at the basket in 1980, some economists were saying inflation is 9%. It's not 3.7%. So you have a negative real rate of return. So I think that this debate goes back and forth and gold bugs like to jump on it and Bitcoin fanatics like to go jump on the same part because they really don't like the government deficit. But what's different is that the U.S. dollar is global and Bitcoin is global. And as we get more tethers or U.S. comes with their own and more stable coins with U.S. dollars, then it becomes decentralized like Bitcoin. And it creates this that either you buy this stable coin with U.S. dollars or better liquidity and stability. And if you want to move other assets and you want to have the ultimate of scarcity is Bitcoin, then you go and own Bitcoin. So Bitcoin will become wealth preservation like gold is and trade will become stable coins. And I think we're witnessing is coming back is the big money center banks want to slow it down so they can run as fast as they can to get their own stable coins out there. Yeah, I think I've been telling a lot of people about that. Look, they're the incumbents and they feel threatened, right? Disruptive technologies at their doorstep. But many of them have talked about launching their own stable coins. And to your point, the geopolitical landscape, the U.S. is trying to push U.S. dollar stable coins across the globe. So I think that, you know, factor, that catalyst outweighs what the banks are trying to do as far as slowing things down. Yes. Frank, you know, here in the United States, we've got some level of a strategic Bitcoin reserve. We're still ironing out a few details. And some other countries across the globe have also started doing this. Do you feel that that's going to further grow? You know, more countries are going to look to establish a Bitcoin reserve, you know, kind of how they have their gold reserves at the central banks and things like that? I think it will accelerate if the Republican Party wins the next big election. But you need sort of an eight-year run to get the rest of the country's really buying into it. I think the most technology-advanced leaders in the world will take a look at having that. and so if they do catch illegal trades and they confiscate that wallet, they're not going to really sell it right away. They're going to start building a reserve. I think that that will be the first step because quite often, you know, they go confiscate cars and these things where they arrested a narco and they took away all of his toys and they have a big auction and the real estate in Texas, they're going to have a big auction. Well, I think that you don't have to worry about the auction to get those dollars, you just turn around and convert those stable coins from one controlled entity into the government stockpile, and they start to collect it that way. I think that that will be a journey that will be easily adopted by countries. Then you will take a look at it as being like gold. Yeah. And I often have to remind myself, like Bitcoin is still a teenager. We're just 16 years in. I know sometimes you want things to go faster, but it does take time. And governments, they don't move very fast. Yes. And I can share with you in our experience in Sweden with government agencies and in Canada, like I mentioned earlier, they think you have this ATM machine in your data center. And it's just not so. And you're selling compute power. One is hash power. And it's recognizing that. and it's also recognizing that countries like Sweden and Canada, they really went after their fintech business. And Bitcoin is a critical spoke in the fintech ecosystem. And it recognizes stablecoins as another spoke in that wheel. And when we talk to Canadian banks, oh, we would like to do your data center business, but you'll have to go to New York City because that's where our fintech analysts are. That's where the fintech conferences are. And in Sweden, they go after their biggest unicorn as a fintech company with all these incredible overreaching that they're not doing their AML, KYC correct, which is just nonsense because it's all automated. It's all with AI. And so it's just the banks in those countries are oligopoly. So Canada has five banks and they block out, they control 94% of all savings and investing. So they basically block out adoption and innovation. And the same thing happens in countries in Europe. It's predominantly, we always think of in America, it's banking. No, it's the beer business. The beer business in America is an oligopoly. There's only a few real brewers. You know, you take a look at how much they control all the network. Well, the banking in most other countries is an oligopoly. And so there's this protectionism. And I think with America, it's not totally, I think we have, when I first moved here 35 years ago, there was like 14,000 banks. And now they're down to like 7,000. But still, there's many state charters and many federal charters. So it's a more decentralized, a dynamic ecosystem in America. And so I think it will come through and America will show that leadership with other countries over the next six to eight years. Yeah, great, great insights there. Frank, you guys are doing a lot. We covered a lot. But anything else that's on your roadmap that you want to highlight? Yeah, I think it's just really for people to be thankful and grateful that we have this incredible country that rewards innovation. Everyone wants to have the story, their kids in America, that Steve Jobs in the garage invents Apple. That sort of dream is very much instilled. And we see that not so in other countries because we function in these other countries. So we are trying to do as much as possible in education in Paraguay. And we started with kids' schools. So every kid's school within one kilometer is getting new air conditioning because it's very hot there. And they're getting new lighting, new chalkboards, new bathrooms, everything new. And Starlink, we're bringing in Starlink for the principals and teachers so that they have Wi-Fi in those schools wherever near our facilities. So we're doing everything to try to instill that American dream. And the same thing, you know, you go to northern Sweden, the big thing is hockey. Everything is hockey. It's interesting, but still the idea that you could be another Steve Jobs, it's not totally there. they're going to relate to. Maybe I could be Spotify or maybe I could be a gamer. But that idea of inspiring that is something that we feel really good about what Hive does wherever we put a data center. I love it, Frank. That's amazing. I love the work that you guys are doing there and helping folks in these countries. Frank, always a pleasure. And I'm sure we're going to do another episode later this year. And I'm looking forward to seeing you maybe at another conference soon. But thank you so much for joining me. Well, thank you. And buy the dip and hodl. Absolutely. Thank you so much for tuning in. Please hit the like button. Subscribe if you haven't as yet. If you're listening on a podcast platform such as Spotify or Apple, please follow and leave a five-star rating. Thank you so much. ... ... ... ...
