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- [00:00]
A
Foreign. What's up y'? All?
- [00:06]
B
Welcome back to the Block Space podcast. For today's live show in Vegas for Bitcoin 2026, we have Matt Pruszak of American Bitcoin. Matt, welcome to the show. Thank you for taking the time, man.
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A
Great to be here doing it live.
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B
Yeah, it's really nice to have these in person shows, man. The dynamic is just so much better and what a better place than bitcoin Vegas where energy is still good this year. Attendance looks like it's going to be down a little bit, but honestly, still big showing and like we were talking about before, we hopped on, just a watering hole for everyone to see all of their industry friends get deals done, stuff like that. Speaking of deals, y' all just recently announced an expansion at the Drumheller site. Three exahashes. What can you tell us about this expansion? Models that y' all deployed and future expansion for that site?
- [00:51]
A
Yeah, no, I couldn't be more excited about that expansion. For us, the Drumheller increase, we're going up, you know, 11, 12% in hash rate. To us, this is showing the market that we're serious about expansion. We started this company about a year ago, April 1st of last year. And we had the mandate of growing bitcoin per share. As a company with mining at our core, this was a very clear way to signal to the market that we're in it for the long run. While many of our peers were not expanding or they've been pivoting to AI, something we may discuss, for us this is just another opportunity to put wins on the board. So we got some brand new machines. These are some Bitmain units. It's a terrific site. We are partnership with Hut 8 on really allows us to tap into a wide energy portfolio and some killer operator expertise to get these things up and running. So we started energizing right towards the end of Q1 and now we're pretty close to fully energized. So that should be printing new bitcoin for us every day from here on out and hopefully more to come. I think the 12% that this adds to our fleet putting us up towards an owned hash rate of about 28 respectable. I think we can go much higher. I think the 28 for us is a quality number. And what I mean by that is that we actually make money. Our gross margin in Q4, which we announced was fantastic. In Q1 we've continued to double down on our efforts to be a best in class miner. And so drum handler should be viewed as A case study of what the American bitcoin team is capable of for
- [02:16]
B
this rollout and future one. Specifically, the bedrock of Yale's hash rate are these U321 EXPHS super cool server rack Direct chip Cool design from Bitmain. Do you all think you will continue to go down that hydro cooled route for your facilities air cooled mix? What's the approach for how you are thinking about cooling?
- [02:36]
A
That's an excellent question. The air cooled versus hydrocooled debate has been raging for quite a while. Plus immersion in the traditional oils or petrochemical sense. We decided to use a hydrocooled modality for this site. It was a technology that we believe has really come into its own and has matured. We believe that the machinery that we've got, the hydro cooled units here are pretty well future proofed for having and it's crazy to think we're already thinking about that. It'll be here before you know it. And so as we try and look over that event horizon, this is a unit type that we're comfortable, will continue to be in the top quartile deciles that are of efficiency in the coming quarters and will position us well for a post hybrid world. And so is liquid cooling something we continue to look at? Yeah, absolutely. Air cooled, there's still a place for air cooled. We have an immense amount of expertise in terms of operating that type of unit. It's just a matter of making sure that we're at the right efficiency levels. Are we getting the amount of bitcoin? Is the juice worth the squeeze? Air cooled? The heat of West Texas for example can be quite temperamental. The liquid cooling, once you get it up and running, if you've mastered electricity and now you've mastered plumbing, you're in a pretty good spot. But yeah, it is a learn by doing situation. We've learned what we needed to do
- [03:54]
B
to perform for and it seems like that's where a lot of the AC manufacturers are moving. I mean I've heard from, I talked to Microbt yesterday, they said that hydro is the future. It seems like they're prioritizing that. I know Bitmain has been pushing it. We've even heard kind of chattering that the S23 air cooled model will be delayed or maybe not released because they're really moving into hydro. And it kind of makes sense with what you were saying about. We're already thinking about the habit. We're already almost in this window to where if you're buying machines today, you need to be thinking about what's going to happen after the halving. And I've talked to some miners who say since the industry is moving towards kind of more specialized and honestly, more thoughtful management, it's converging on that form factor. Because the machines last longer. You do get. They're more reliable, they don't tend to have as many issues, like you said, in really hot places like Texas, or break down as much. It's something that I'm really curious with right now. And maybe to round out this question about asics, what are you seeing with the ASIC market dynamic currently? Because you have a lot of the public miners phasing out of bitcoin mining, or at least toning down their ASIC orders and going into AI. And I would imagine this has put some of the manufacturers in kind of a tough spot because they just lost one of their biggest customers. If you can speak to what are some of the biggest changes you're seeing currently within the ASIC market as one of the, I would say, premier consumers now in the us, as one of the only pure play public bitcoin miners left.
- [05:27]
A
Basically, as a bitcoin miner, you're always short something. You're either chasing megawatts, you're chasing machines, you're chasing money, or probably some combination of all three. Right now we're in a situation where the megawatts are, I think, where people are trying to find quality megawatts. We're competing obviously as an industry with AI, HPC, high performance computing, 4 megawatts and things like that. So that's where the scarcity is. Conversely, with chips, somewhat of a glut, I wouldn't go that far. I think getting quality machines, there's still some negotiating power to be had by both sides. But to your point, the manufacturers are in somewhat of a unique, maybe challenging position if you think about it from their perspective. They also have their manufacturers. This is almost a conga line of a supply chain and everyone's got to keep going in rhythm, otherwise things start to get a bit jumbled. They have gone jumbled. We've seen a lot of the major miners, the marquee American ones, for instance, have pivoted towards AI, if not necessarily in revenue, at least in rhetoric. What that means is that they've ceased or they've slowed down on orders for new machines. This could create somewhat of a supply situation where the manufacturers are now deciding how we're going to offload all these exit hash that we've built. So for us, as American bitcoin, this has Presented an opportunity to really structure ourselves, to take advantage of that, to work with these manufacturers. We've known them for years. Obviously we've got great relationships with all the major. And we want to get deals done. We're not going anywhere, so we want to get deals done. We want to find creative ways to work together that allow us to partake in growing eggs a hash, but also allow them to move units, which is something that is core, so that they can continue to work with their suppliers to keep wafer allocations, et cetera. So look, I think for American bitcoin, you've seen with the Drumheller expansion, as you alluded to, and then even our prior deal last summer, our initial tranche there, we were all very keen on finding creative structures that allow us to maybe work manufacturers do some pledges of bitcoin, et cetera, they move units, we get hash rate and everybody wins. Yeah.
- [07:29]
B
You had that bitcoin option, correct for the purchase. I thought that was a really interesting financing tool and I guess. Sorry, I lied. Last question on this. Is it getting to a point where now the miners have you said you want to get these deals done? Obviously Bitmain needs to get these deals done. They need to make sure that they can keep up their allocation at tsmc, make sure they actually have real deal flow so that they can put the deposits down on future tape outs. Are miners in kind of a better position now than they have been in the past? At least in terms of having bargaining power over the OEMs. It seems like a clear buyer's market.
- [08:07]
A
Machines, yes. Megawatts, no. Unfortunately, as I say, God does not give with both hands. We're doing better than I think we have in cycles past when it comes to, to machinery. That's been great. Also on top of simply better negotiating power, I think we're getting more depth at running these things. I think, I think that the relationships with manufacturers, there have been some American ones that came up trying to be disruptive and they're doing their best as well. We're working closely to create a best in class machine. We give product feedback, we run the machines effectively. Those relationships are really worth something. And now that we've gone up and down and up and down together a few cycles. Yeah, I think we're pretty well situated with the machine side. Again, the megawatts are probably where there's been a bit more of an industry wide.
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B
Right.
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A
I wouldn't say struggle, but maybe, maybe it's a headwind or a slight challenge. But, but on the machinery front Whether, whether it's, you know, with one of the incumbent players or one of the new players. Yeah, there's a. It's a good time to be in the business of buying machinery.
- [09:08]
B
We are CleanSpark, America's Bitcoin miner.
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A
A publicly traded company with the largest operating hash rate powered entirely by self operated infrastructure across four states. This is our proof of work. We are setting the standard for what's next. Learn more about the intersection of energy
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B
and bitcoin@cleanspark.com I'm glad that you mentioned megawatts and them being tougher to come by in the hunt for megawatts. What are y' all thinking for expansion? You know you've got a lot of competition from this whole AI bull market, right? And you had the rollout at Drumheller. Where else are y' all thinking about expanding in the next couple of years? Where are the opportunities as you see them for megawatts?
- [10:01]
A
You know, you follow the electron. And so in the United States or North America, there are pockets where this makes sense. Now these pockets are increasingly far flung. I don't think you're going to find a site in urban core or even near one, frankly these days I think that if you look at the buy box, if you will, for AI hpc, they want low latency, they want the urban core, they want fiber redundancy, power redundancy, potentially some water as well. We are not quite as needy, which if you want to be opportunistic means that we can go further afield. But if you want to be a bit dismal, you could say, well, harder to get those sites close to urban cores, that's fine. I think for us we're able to go far field and do fairly well in these more remote locales. But I think in the United States, Texas has been good to us and will continue to be good to us. I think in Canada we've seen some great opportunities. In Alberta especially as well. We have not expanded at all in South America or overseas internationally. And while we are American bitcoin, I think first and foremost we want to secure hash rate here in the United States. I think we're certainly open to exploring any opportunity that will have an American flagged company securing the network. So we're not totally disavowing other geographies. But for us, I think the United States has a unique position where the electrical grid is actually fantastic. There's energy here to be had, the rule of law is strong and the capital markets are deep and it's really that combination of those three things that
- [11:31]
B
need to have a hard to replicate,
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A
that it's very hard to replicate, you can usually get one or two of three. But to have a lot of electricity, a stable rule of law and a very deep capital markets is a special combination.
- [11:42]
B
And with regards to Latin America, I mean, you said you'd be open to expanding there, but part of the reason why maybe you haven't made that push yet is for those reasons that you mentioned. But also I know that Bit Farms pulled out of there recently and we were told, hey, look, a lot of our American investors are kind of saying, what are you doing down there? We don't know how to price these areas. Do you get a sense that that's maybe something that would impede rolling out hash rate in that area?
- [12:09]
A
I think potentially as an executive of any kind of company, you should take the risks you're paid to take. Historically, I've not really viewed myself as being paid to take risks on Latin American geopolitics. That being said, if it's something where we saw a need to get smart on it and underwrite it, we certainly could. People have been going down to Latin America and doing business there for centuries, honestly, so it's not out of the question. But I really have an ethos. If you want to measure twice and cut once. If we're going to do something, it's going to be a market where we're not just there for a good time, but we're there for a long time. Again, I'll use an example. Argentina has started to pick up a bit. Obviously there's been suppliers who have retreated from that, but they've been increasingly interested in leveraging their natural gas assets. That was not the case five or ten years ago. If you want to leverage natural gas assets, Bitcoin is typically not far around the corner. So there are interesting pockets again in South America or more broadly even in Latin America where we could be an effective partner. But yeah, I think it's going to be something. We're going to be very thoughtful and when we find the right deal, we'll be very excited. But until we find that right deal, we're going to be very careful.
- [13:21]
B
That makes sense. You just mentioned natural gas assets. You also talked about Alberta. And when I try to model out bitcoin mining in North America, particularly over the next 10 years or so, I would imagine that the bulk of the mining, once these AI transitions are done, will be done around assets like that and will probably be smaller scale. You mentioned a lot of These AI data centers need to be closer to cities. They're going to need massive megawatt allocations, are going to be pretty big centers. But you go further out into the country, you might be able to find opportunities.
- [13:52]
A
Curious.
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B
If you think that those opportunities will be smaller clusters of megawatts rather than the big cathedral designs we've seen in the past with bitcoin miners or what your thoughts are on that form factor versus a larger one.
- [14:03]
A
That's an interesting observation. I think cathedrals economies of scale are real true in most, if not all industries. I think for us, a few large cathedral designs, something I've seen and implemented across an array of bitcoin companies in the past, it's compelling if you can swing it, but if you can't swing it, we do actually have the ability to be more distributed than say an AI HPC business could. I think the economies of scale for us are much more in the capex and maybe in some of the optics as well. But it's not necessarily from a compute perspective versus if you think about an AI cluster, there is genuinely some compounding effects to the networking of those computers being next to each other. We don't really have the same mandate or the same need. So we are a little more flexible in our ability to do this. The same flexibility we have we can curtail more rapidly. If I shut down the machines, I'm not going to lose half of a foundation model for abruptly having shut down. So there are certain nuances around the kind of workload that we bring to the grid that I think free us up in a way that AIHPC can't compete with. Now, they've got other advantages, they've got fantastic revenues, et cetera. But for us, yeah, we could go concentrated, we could go distributed. Something that some of the AIHPC folks have been exploring is byog. Bring your own generation. Where the public utility commissioners, et cetera, are trying to say, hey, if you're going to bring this kind of load into our grid, why don't you try and find a way to bring some power along with it so you can kind of offset some of your demand? Yeah, I think miners were early onto that one.
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B
Right.
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A
I think we were once again miners ahead of the game. Bitcoin folks tend to be early. This was an area where, whether it was with flared gas, et cetera, or some of these smaller plants, we've always had the thoughts around how do we partner up with generation behind meter, et cetera. Are there things we can do to supplement the grid More so than just plug and play into a, you know, a substation somewhere.
- [15:56]
B
So, yeah, so we've been dancing around the AI topic, but we're diving into it now. You mentioned there's obviously they have a lot of advantages over bitcoin miners. I think the most visible one over the last year has just been mind share and market share. In the sense of anything that had AI on it, people were throwing money. I mean, you know, allbirds changed, you know, changed to an AI company and their stock pumps. Like this is the Long island blockchain. You know, on IC blockchain days, it's been kind of wild to see. But American bitcoin and some other bitcoin miners, mostly private, have stayed the course. Tether is a good example on electron. American Bitcoin, I think the premier one in public markets. How do you sell focusing on only bitcoin mining? When a lot of your peers are going AI and hpc, what do you say to investors? You say, well, why aren't you thinking about doing this? This seems to be where the money is.
- [16:47]
A
Fair enough. Look, when I was a Bain and company, the total strategy really boils down to two things. Where to play and how to win. The company's called American Bitcoin. I think for us, the category we want to be the leader in is bitcoin, predominantly in America. North America too. Right. And so as I think about AI, hpc, I first of all love AI, use it myself. It's unlocked levels of productivity. I would have thought impossible. In some ways, it's almost magic. That being said, I don't necessarily want to take our business and then go compete in that world. I think we've really over the past year built out a track record of winning in our field. And I'm very happy with that. I'm happy with the margin profile of our business. I'm happy with the low SG and A. I'm happy with the relationships we've got with our vendors. I'm happy with the growth story and the narrative. Bitcoin is a $1 to $2 trillion asset class, depending on the day. That $1 to $2 trillion asset Class is really being secured now by only a handful of players. As more and more leave, I think it becomes even more paramount that players like American bitcoin step into that void. This is an industry where America really does need to lead. This is an asset that 40 to 50 million Americans own, a piece of bitcoin. We really ought to have American miners that are delivering for that kind of token holder. Bitcoin holder base. Whether folks want to go in pursuit of something else that makes more revenue, it's fine. But I view that as a trade that they're choosing to make that we are not with American Bitcoin, we're building an enduring business. And bitcoin, as I've jokingly told having my friends buy bitcoin is like watching them win the lottery in slow motion. I'm okay with that. And that's the industry that I signed up for. And I know that in a crypto Winter, you feel like you're pressed against the glass and you can see people having fun on the other side. But winter is for building and for us, we've just doubled down on what we do best and I think we'll be rewarded for that long term.
- [18:39]
B
Yeah. And you know the interesting part about American Bitcoin, obviously with the combined entity with HUD 8 there is the AI and HPC and data center management, energy management side of things. On the Hut 8 side, it's one of the more interesting case studies for a public miner in that sense or a public company in that sense because you have these two public facing companies and they're each laser focused on one thing versus the other. Can you speak to that synergy and what that does for American Bitcoin specifically? Kind of having Hut 8 as that parent entity to usher in or to help usher yalls hash rate expansion, stuff like that.
- [19:14]
A
It is an incredibly unique structure that American Bitcoin and Hut 8 share. And it's one that I think is really potent advantage for us. On the American Bitcoin side. It frees up our mind to really be strategically focused on bitcoin accumulation. Satoshi's per share, something I think about every day. How do we make sure that each share of our company is being backed by increasing amounts of bitcoin, through mining, through a treasury, et cetera. What are the things we can do to keep growing that amount of bitcoin per share? That ethos, that's my mandate at American Bitcoin. On the other hand, hut 8, Asher and his team over there, they're focused on operational excellence. It's a different set of KPIs, it's interrelated. And the better they are at their KPIs, the better I'll be mine. But their KPIs are much more focused on the capex and the OPEX that comes with compute. There are learnings that they've had from AONHPC that are cross applicable to bitcoin mining and Vice versa. But for them, they're able to put this strategic focus into the operational aspects of the company. We can harness that in a very, say, asset light way. I'm not tying up capital in substations or bus bars or electrical equipment. I want to tie up capital in bitcoin and in exahash. That's what I want to put money into. And I think that's what my shareholders want us to put money into as well. Working with Hut 8 allows us to really do that. And on the Hut 8 side, it's a dream. They've got a customer, if you will. They've got a client in American Bitcoin that is able to grow with them, scale with them. I think running a business where you can scale with your customers is incredible. If you look at the history of Amazon Web Services aws. In a way, AWS was levered against the success of the Internet. As different companies grew and scaled, the amount of servers that they procured from AWS grew over time. I think with us and with hut 8. As American Bitcoin grows and Scales has a partner, they've got someone they can build for, someone they can develop for. And that's a kind of very nice relationship that I think separates us from the pack and allows us. When you look at the economic model of American Bitcoin, it's like lemonade stand economics. It is the equipment, it is the machinery, it is the team that is kind of at the management level making sure that it is running at the optimal level. But we're not conflated or confused with other lines of business and things like that. And as I've seen some of our peers in the industry pivot towards AI hpc. It's been watching something like trying to watch someone u turn an aircraft carrier, right? They've put enormous capex and enormous investments into the human capital to run these things as well as the machines, as well as the infrastructure. Not necessarily easy to pivot either the infrastructure or the culture. But for us, we've got this American bitcoin culture. We've got a team that's very much orange peeled and ready to grow and scale. And then on the Hut 8 side, we've got a phenomenal group of guys that know how to run a bulldozer. It's a good combination.
- [21:50]
B
A quick shout out to our sponsor, Luxor. This episode is brought to you by Luxor Commander Bitcoin miner management software for enterprise solutions. Commander gives you real time fleet monitoring, bulk remote commands over your fleet and intelligent miner, an automated Profitability engine that runs every five minutes and adjusts power settings to live hash rate markets and energy markets. Ercot backtest show 10% more profitability with intelligent mining versus binary mining. Commander Pro is $100 per megawatt or a 25 basis point pool fee adder. It's roughly half the price of competitors, but you can try it for free for 60 days. So if you want to learn more and interested in getting started, go to Luxor Tech Forward slash Commander. When you think about expansion, so Hut 8 got, I mean, American Bitcoin got its start operating ASICs within Hut 8 infrastructure. Will you continue that model going forward for future expansion and new sites, or will American Bitcoin shoulder some of the load for developing sites or are you going to try to keep that separate?
- [22:50]
A
The way that we structure things to date, where Hut 8 will do the development is a model that we quite like. The way that it kind of goes down, so to speak, is they, you know, they, they'll develop for us on a pretty rapid timeline. There's a payback period built into the development, there's a fee that's appended onto our energy bills, et cetera. They get a very linear payback period. We get the bitcoin upside. Everyone is happy. Again, back to my earlier comment. You want to take the risks you're paid to take. They're doing infrastructure, they're taking infrastructure risks, we're taking bitcoin risks. I think everyone's very comfortable with that arrangement in terms of future sites and future expansions. When I pick up the phone, the first guy on the call would be my, my hut 8 team, I think. And not just because I like them and I love those guys, but also just their track record has been awesome. I mean, I mean it's. They're on time, they're very effective at what they do, they're passionate about what they do. And if I weren't already working with them, that's the kind of partner I would look for.
- [23:46]
B
Got it. You mentioned bitcoin risk and this is a good segue into one of my other questions that I had, which was regarding bitcoin treasury companies. So I would consider American Bitcoin a bitcoin miner first with the treasury element on top of it. Right. But it was partially marketed and billed as a Treasury company during the big Cambrian explosion last year. Big difference between American Bitcoin, though, and a lot of the other treasury companies, which are mostly capital markets plays, don't really have operating businesses. American Bitcoin does. I'm curious how you see American Bitcoin positioned in this Venn diagram of Bitcoin miner and Bitcoin treasury company and how much of that treasury element will be a part of the company's kind of selling point going forward, given the fact that investor confidence in those assets is kind of deflated.
- [24:31]
A
It has been very interesting over the past year to see the rise and dare I say, the fall of the treasury model. Again, I don't want to overly downplay that. I think there's been some very interesting and compelling things that have come out of that approach. Lessons were learned. Some folks did very well, some folks didn't. But I think it's an interesting approach towards bitcoin accumulation. And I think that is the term that I really hone in on for us is where bitcoin accumulation, that's very specific. I think that I tend to think of this idea that jobs are verbs, not nouns. It's not your title. It's like, what do you do for American Bitcoin? What we do is we accumulate and we mine. We don't treasury, we obviously we have treasury operations. We try and do different things in the market. We have an atm, et cetera, like many of our peers do. But we're a company that's predicated on a firm which is actions that lead to more Bitcoin accumulation. Now, 2026, the actions that lead to bitcoin accumulation are predominantly mining. It's been true for 10 years plus plus, if you want to actually put in sweat equity at bitcoin, mining is the way to do it. Now, down the road, there's things I think we want to get more into. There's stuff in traditional finance, there's stuff in defi as well. Those are areas where to term the Cambridge explosion, if you will, where I have to move at the speed of the ecosystem. If more DAPPS distributed applications go onto the bitcoin blockchain, either layer one or via layer two, et cetera, if there are more things that can be done in or around bitcoin that we can tap into and grow our bitcoin stack through those activities, I'd certainly be open to it. But for the time being, I think American bitcoin mining is a very linear way to say we're a bitcoin accumulator. To your point is people ask, well, who are you and what do you do? I somewhat take pride in the fact that I can very clearly explain on a cocktail napkin how we actually grow the stack. It's something that I think for the average investor, they can understand things like gross margin, they can understand these net income ideas and things like that. Mining is a very straightforward way to do that and it's one that we're effective at.
- [26:33]
B
Well, speaking of margin, hash price has been getting crushed with bitcoin drawing down. It's been, it's been alleviated somewhat by the fact that difficulty has actually been pretty stagnant over the last few months. Also, bitcoin's back up above 75, so that's helped some. But we're still close to all time lows. We're at like 35, $36 red hash per day. How do y' all at American bitcoin think about stealing your operations for this winter? And also thinking about, you know, the halving coming up in about two years here. How do you think about designing your operations to make sure that you can survive in that low profitability environment?
- [27:10]
A
Resiliency is something we baked into the core of the business. I think you have to if you want to survive. There were, there are many miners, some of whom were quite successful in their day, who just didn't bake in resiliency. And so when things boom, they did very well and when things busted, they blew up. I did not really want us to be like that. I think when you think about American bitcoin and you think about what bitcoin is, it's a volatile asset. You know, it's, it's a, I think many, almost everyone in the industry is a believer that in the long run bitcoin could go to a million dollars a coin could go higher again, 1 to $2 trillion asset gold. I think when you and I discussed a year ago today, we talked about bitcoin as the next goal. At that time, gold's market cap was around $20 trillion. Today it's close to like $30 trillion. A couple extra trillion there. I think that gives us some headroom for bitcoin to get to a much higher price. Now the caveat though with that higher price is I think we may take the scenic route to get there. If you were to ask me what the long term projections for bitcoin or. I'd be quite optimistic if you'd asked me the price of bitcoin in July. I don't know. I don't know. I could use words like stochastic. I could try and give you an estimate, but I don't know. And so because I don't know, I need to be very thoughtful about the risk, attended to that and I need to make sure that there's not a duration issue with what we do. If I believe long term Bitcoin is going to go up, I need to have a business that's around long enough to partake in that upside. And so if you look at the price of Bitcoin, Q1 to your point, was a squeeze in the price of Bitcoin? I think our operations, we performed as well as we'd hoped, but the price of Bitcoin is not within my control. And so hash price to an extent is really not within my control either. We can have newer machines, we can run them well, but you can only control what you can control. And so what we really did in this past quarter and you've seen now this rally as bitcoin goes back up and hash prices is falling, you've seen us be really well positioned for a spring or a summer in crypto. I think it's going to be very hard for a period so many of our peers have pivoted now towards AI. If when Bitcoin rallies again, as I think it is wont to do, when Bitcoin rallies, it's going to be very hard for those former competitors to pivot back. I think that talking business about one way and two way doors, the pivot to AI for most seems to have been, at least in their rhetoric, a one way door. So if Bitcoin were to double, for example, or hash price were to double, they've already begun the AIHPC retrofits and conversions. So I don't think they're going to be doubling their hash rate overnight to try and partake in that hash rate upside or hash price upside. Whereas for us for sure, we're not going anywhere. And so if Bitcoin stays at these somewhat depressed levels compared to the peak we had last year, okay, well, we can survive when the time comes for Bitcoin to rise, which we do believe it will. We've had no duration mismatch issue. We're very well positioned for that upside.
- [30:00]
B
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- [31:34]
A
Listen, I think if you've got a keyboard, you want all the keys. So if people are going to put some derivatives out there as things we can use, then that's great. Those were not options on the keyboard for a long time. Now the liquidity is still forthcoming and we need to have better market making, et cetera. Spreads are widening like that. But instruments that allow the transfer of risk are fantastic. I mean things that allow me to really shape the structure of the business in line with my worldview. And maybe you want to protect downside here or cap the upside there or whatever. These are things that things like hash rate derivatives really enable. I think, I think bitcoin derivatives and bitcoin options were something that are now finally pretty solid. You can do all sorts of stuff on bitcoin at scale that you couldn't really do in a pretty compliant fashion over the past few years. Now you can, I think hash rate derivatives will be the next thing there. I think it requires an additional complexity around hash rate delivery and things like that. It's not quite as easy as just bitcoin, but I think it's an important tool. And so if miners want to be buying and selling hash rate, again, it's all about risk transfer. And so being able to hedge energy is fantastic. Being able to hedge bitcoin price is great. If you can do hash rate as well is kind of the missing piece of the puzzle to start to control a few of the factors. Because right now if things Slip in certain directions, you can't really lock in. We're not really in the mood right now to lock things in, but I'd love to have the option. So it's something that I really welcome as further evolution of the industry.
- [33:03]
B
Well, speaking of not wanting to lock in hash price right now, which makes a lot of sense, right? So for context for these hash rate derivatives for our listeners, you can basically lock in a certain hash price, BTC or USD denominated if you're a miner, and then get payouts under that hash price for a specified period up to six months with lectures at least. But obviously right now might not be the most attractive thing. And if I were going to make a bull case for bitcoin mining right now, I would actually look at all time low hash price. I would look at the AI pivots and as long as bitcoin's price doesn't just totally puke, which could actually probably a pretty good setup to bounce. I'm curious your thoughts, what do you think will happen over the next few years in terms of hash rate? Because when I look at the market currently again I see some dedicated miners like American Bitcoin still buying hash rate and expanding. But I see 20 to 30% of the US hash rate in public miners that is looking to go offline sometime within the next four to five years if they can pivot to AI and hpc. Do you think we're going to see historically low hash rate growth over the next few years into the next halving? To me it's kind of a leading question, but I can't see it any other way.
- [34:14]
A
It is something I think about a lot. It's an excellent question, network difficulty. I think we grew accustomed to years of just relentless growth, growth, growth, growth, growth every two weeks that a difficulty adjustment would come and it was rarely positive. I mean you would see the difficulty of your day to day going up over. There's no other industry that really has that sort of ratcheting effect now. We've seen a quarter or really two quarters now of a flattening of difficulty. Again I think there's a few factors. So why don't we just go through this here. There's the AI, HPC pivot, some of the miners, so there's simply less American public companies that are buying hash rate. There is a potential slowdown in the compute itself. The years of the AC came out, difficulty obviously skyrocketed. There were advancements. I think when people really shifted from air coal to a liquid coal modality whether it was hydro or immersion, I think that also contributed to the jumps. But then I think to your point, there's just kind of AI HBC aside, the hash price is not compelling for even maybe some new pure plays. It's just if you were to underwrite a brand new bitcoin mine today with no background, I think trying to marshal the several hundred million dollars that it would take plus the know how to actually do it successfully is a tall order for a lot of folks worldwide. Hash rate and network difficulty may not be able to keep up with the price of Bitcoin in the way that it used to. Historically, if bitcoin were to double hash rate, it's elastic but it's on a delay and it's just very tough. Getting machines online is just going to be very tough. I think between supply chain and trade issues, megawatt issues, I mean fuel skyrocketing. Yeah, yeah. I mean basically it's putting hash rate on the network and NAS has, I'm not sure ever been this difficult, which as a marquee American miner, great. I mean these are competitive moats that have just sort of structurally emerged. What that means for the network overall we'll see. But to your point, network difficulty will probably. We've been flat for a bit. There will continue to be some advancements, new machines will get put online because new machines are getting made and those machines will find a home somewhere on the planet and they will turn on and you'll see that in the tape. But yeah, the marquee order or the banner idea of we're going to go to 100 eggs a hash, I don't know which American of the former leadership of the mining industry in the United States. I'm not sure who's gunning to break 100 right now or break 150. And so if you were to do a sort of a model, well, you know, these guys want to do this and these guys want to do that. I think you're going to come a bit short. And again there's overseas mining concerns as well and those folks will continue to put machines online. So I do think COMPUTE will continue to come and there will be further advances made, et cetera. But yeah, it's going to be really interesting difficulty environment going into the next time.
- [37:16]
B
I mean it's been wild recently. We've seen crazy swings and also the most successive and the most the largest cluster of negative difficulty adjustments since the China mining ban. It's been really interesting to see the early stages of this AI pivot play out because it's not like we haven't even had a lot of the hash rate come offline from the big public miners. We're kind of in this phony war period, right, where everyone is just. There's a slowdown because everyone's kind of standing around seeing what's going to happen next because none of the public miners are buying machines outside of American bitcoin, few other private miners. It's really kind of a fascinating time.
- [37:54]
A
The game theory is really. I mean, I love our industry, but the game theory is fascinating in this specific instance too, because to your point, people have categorically stopped going on offense. I mean, you aren't seeing these massive new sites. The incursion, it's just not happening, really. I mean, again, American bitcoin, hey, we grew the fleet that double digits last quarter. That was rare. And I think we were the only one to do that. So the offense is basically stopped. It's going to be those fleet liquidations in that defense, and that's going to take another year. I mean, you know, if you've seen Indiana Jones, right, There's a scene in the very beginning where there's a golden head and he's got the bag of. They're trying to do this flip. That is a little bit what I think some of these AHC pivots are trying to do. It's. He spent a lot of time building these gorgeous cathedrals for mining. And you're going to invest tens of millions of dollars, hundreds of millions of dollars, to turn these into AI HPC cathedrals, which is fantastic. But you, you know, at some point, you're going to have to shut off those bitcoin mining machines and we're going to. We're going to notice. I'm going to the day you really cut the cord and pivot to AI hbc. I'm going to see that.
- [38:58]
B
And y' all are going to be popping some champagne.
- [38:59]
A
Exactly right.
- [39:00]
B
Okay. All right.
- [39:02]
A
Cheers. To AI. You know, so. So look, I. I can't.
- [39:04]
B
I can't help.
- [39:05]
A
Look, Winters are not always fun. Winters are for building. But. But I'm. I'm feeling very sanguine. I've got this bittersweet optimism. I. I truly have high conviction in what we do at American bitcoin. I have conviction in bitcoin overall. I have conviction in the ability of American miners to maintain leadership. And yeah, I think the best is ahead of us.
- [39:22]
B
So speak. Okay, so that leads into a question to cap off this future of mining and AI world Right. So you still have confidence in the leadership of American bitcoin miners. What do you foresee the industry looking like in four or five years? Once a lot of these mega miners have either totally pivoted or halfway through their pivots. Right. Most of their hash rates offline. What do you see as the future of the mining industry in the US when these big players leave the market?
- [39:48]
A
The singular catalyst that I think will, and it will happen, it will change the mining industry will be the transaction fees. And I don't know if that's a three year or five year, ten year thing, but, but it is going to come down to network usage. I'm aware that there'll be layer 2s and there'll be things that are trying to slow down the congestion of the network, which is the downside of the usage. But that is going to be the time where bitcoin mining as an asset class is rerated. Because right now mining is really still predicated upon the block subsidy. We've got a certain amount of bitcoin per day. It's mathematical. You point out the halving is upcoming in a few years. I can tell you how much bitcoin will be in the subsidy for the next century, honestly at this point. So that's what that bitcoin is worth. That's more debate. But the amount of bitcoin that is going to be mined is mathematically certain. The transaction fee amount is not mathematically certain. That to me is very interesting. And again, I don't know, I don't profess to know if that is something that is going to materialize before the next having or after it or the one that follows. But that is something that will, I think, really change the industry. Until that point, let's assume that the status quo, that there is not going to be a transaction fee renaissance over the next, say 24 months, you're going to see a continued concentration, at least in the United States, into institutional miners. I think that the coverage of the industry, folks like yourself has matured and improved. I think people are now asking the right questions. What is your team set up? What is your sga? What is your gross margin? How much money do you make? What's the capital flow? The industry? Those covering industries have wised up, which I think leads to better operating teams. So I think you'll see a smaller group of people, but you'll see a group of people that actually make money in the business. I think it's not going to be a game of depreciation schedules and Things like that. It's going to be genuinely seen as an operating business and you're either going to perform or you're not.
- [41:40]
B
Yeah, and I think that's one thing that a lot of people miss with the explosion in hash rate over the last few years. You kind of alluded to it, but it was just unprecedented growth. And part of it was because you had these public miners who had access to public markets and they could issue shares and honestly probably inflate hash rate and kind of artificially inflate how much hash rate would otherwise be on the network. If you were just thinking about, okay, how do we actually pay for these rollouts with what we are making? How do we be judicious with the balance sheet? Well, Matt, we're running up on time, but I've just got one last question for you as a closer. What are you most excited about for the rest of the year with regards to American bitcoin and what you'll have planned Again?
- [42:18]
A
I think for us it's the continued accumulation. I mean we're over 7,000 bitcoin. That's our first year. What's ahead is even more exciting. I think becoming that category leader in bitcoin in the United States. It's a privilege. And I'm excited to continue to update the markets as we grow.
- [42:31]
B
Well, looking forward to Yalls earnings release coming up soon. This will probably be out right before that. Could have waited for the earnings release but I could have, couldn't resist the in person interview. So Matt, thank you so much for joining me.
- [42:42]
A
Thank you for your.