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Bitcoin miners 'incentivize' renewable energy producers to invest in development: Marathon CEO

Marathon Digital Holdings Chairman and CEO Fred Thiel joins Yahoo Finance Live to discuss the intersection of bitcoin mining and renewable energy, along with recent crypto volatility.

Video transcript

RACHELLE AKUFFO: Welcome back, everyone. Let's check back in with the crypto market after hours. We're seeing Bitcoin to the upside there, up-- it's relatively flat, but just slightly about 0.1%. Look at Ethereum, though, up almost 2% there. So that's definitely one to keep an eye on. Well, joining us now to discuss the outlook for Bitcoin miners, we're going to have a guest, Fred Thiel, coming up for us to really break some of this down. So, obviously, we've been in this crypto winter for a while. Are we signaling some kind of turnaround, or is this sort of temporary optimism?

FRED THIEL: You know, it's hard to say. I think we personally believe that Bitcoin is going to kind of move sideways to slightly up. I think there's some optimism around a combination of the recent inflation print, CPI numbers. There's some optimism that Q4 will see kind of an easing of the Fed's brake pedal, if you would. And that's going to drive more interest in risk-on assets, which drives more interest in Bitcoin and Ether.

Ether is also seeing obviously positive momentum with the progress towards the merge, which is scheduled now to happen in mid-September. And so I think you're going to see some continued interest there. The benefit for people in the Ethereum world is that when the move from proof of work goes to proof of stake, there will no longer be any mining of Ether. And so the supply entering into the market will decrease. So there's some built-in kind of demand supply changes that people are pricing into the market right now. And I think that's driving a lot of the interest.

But generally speaking, I think it's really driven more by a belief that risk-on is a little bit more interesting. You've seen that in the NASDAQ. You've seen that, obviously, in the equity markets. And these markets are very correlated right now. And so if the equity markets turn in the other direction, as some analysts believe, then I think we may see crypto go down in that direction. But as a miner, we're very optimistic, obviously, long-term about Bitcoin. We think it's a great asset to hold. And we're very positive.

AKIKO FUJITA: Fred, it's interesting that you mentioned the correlation with some of the economic data. It wasn't so long ago that people were talking about crypto as a hedge against inflation. Now it's moving just in tandem. We've seen a number of miners not in Nevada, but primarily in Texas, who have seen the tradeoff here, number one, with Bitcoin prices coming down, saying, look, it's not worth mining for us right now, especially when energy costs are so high. What does that calculation look like for you, where you are?

FRED THIEL: Well, Bitcoin would have to drop quite precipitously for us to well below kind of the 15,000 price for us to go through those considerations. But we're in the process of opening a new facility in West Texas out west of Odessa, Texas, where we sit behind the meter at a wind farm, and we're able to use stranded wind energy, which otherwise couldn't be sold into the grid.

And the way our agreements work with the grid in Texas, we have the ability to essentially sell back energy to the grid if the grid needs it, acting kind of like a battery, if you would, for the grid. And there will be times potentially in the hot months and winter where we'll do that. But generally speaking, our energy costs are quite low. And we feel that Bitcoin price has to go way down for it to be a concern for us.

RACHELLE AKUFFO: And it's interesting because we hear a lot about the environmental concerns with Bitcoin mining, but you actually see it as a way to transition into clean energy. Tell us more about that.

FRED THIEL: Yeah, so if you think about the energy markets today, our energy grid consists of a stack of different types of energy sources. Nuclear is at the bottom. And it's at the bottom because you can't really turn it on or off, up or down. So that is constant baseload. Then you have coal for similar reasons. It's very hard to turn coal plants on and off. Then comes natural gas, which is very easy to regulate on and off. And last of all comes wind and solar.

And the problem is we want to incentivize the buildout of more wind and solar, but wind and solar is the first energy to be shut off by the grid when it's not needed. And again, we don't use constant amounts of energy 24 hours a day. Peak energy consumption is 4:00 PM to 9:00 PM. During the days when people come home, they turn on their air conditioning, turn on their heater. They're cooking, they're washing. They're doing things like that.

And so it's only at peak times, really, where the wind and solar has an opportunity to be sold. So if you want to incentivize renewable energy, you want to incentivize these energy generators to build more wind and solar so we have more renewable energy, you have to give them a customer. And we act as a base customer. We sit essentially adjacent to their facility, taking all the energy they produce that they can't sell to the grid.

And when the grid does need the energy, and that energy is being purchased from the energy producer at a higher price than what we pay, then we shut down and we get a benefit from that. So we act essentially as an incentive for the renewable energy producers to produce and invest in more energy production. And then we act like a capacitor or battery. Whenever the grid needs that energy, we will gladly shut down and provide it to them because we have an economic incentive to do that.

AKIKO FUJITA: Fred, the recent pullback in crypto has led to some consolidation in the space. And it wasn't too long ago that you said that you would be open to a potential acquisition if a buyer stepped up to pay a premium on your market cap. And you said specifically that you thought energy firms could be good buyers or in prime position to buy out Bitcoin miners. Number one, why? And number two, have you been approached by any of these energy firms?

FRED THIEL: Well, I'm not going to comment on kind of our own M&A activities. But what I will say is that the energy providers-- again, think of it this way. They can either choose to build their own Bitcoin mining facilities so that they have their own baseload customer. That, though, from a regulatory perspective is a little risky. Energy companies tend to be very conservative.

So what they want to do, first and foremost, is partner with mining companies, such as ourselves, and build data hosting facilities, which they can operate as data centers. We put our miners in. We act as the anchor tenant, if you would, like in a shopping mall kind of structure or model. And then over time, as they get more comfortable with this, we foresee them buying either out miners or doing the mining themselves.

And we've already started seeing some of the latter. But I think what you're going to see is that kind of large utility scale. Building it yourself doesn't really make sense for the power companies. So I think we're going to start seeing them looking at, OK, who are our big customers? And does it make sense to buy one of our customers then? As we look at continued expansion next year and the years beyond that, our partners are primarily the energy companies.

And so it's kind of just like in any industry. When you have strategic partners and you work closely together, eventually, there's a consolidation. And so that's the basis for that hypothesis.

RACHELLE AKUFFO: We'll be keeping an eye on this space. A big thank you there to Fred Thiel, Marathon Digital Holdings chairman and CEO. Thank you for your time.