Grab your warmest coat because Bitcoin winter is here. Price is down, feels are down, but hashrate is up and blocks still come every ten minutes.
Timestamps:
00:00 Start
00:26 Intro
05:04 Terra meltdown
11:01 Multiple bear cycles
27:14 Mining through bear markets
42:18 Tips for efficiency
49:40 Maintaining machines
53:29 Wrap up
Audio Version
Transcript
Foxley: Welcome back to the Compass Podcast. Today we're joined by Michael Carter aka bits be trippin. Michael walks us through how to mine during a bear market, including strategies for shoring up your portfolio. And also when to turn off the lights and turning them back on again. This podcast is presented ad-free by Compass Mining the largest marketplace for Bitcoin mining. Check out compassmining.io today, if you want to buy, sell, or host an ASIC and now onto the show.
Foxley: Michael, welcome back to the Compass Podcast. Thanks for joining us. I'm really excited for this conversation. I think a lot of our customers and a lot of people out there we're just interested in mining are going to be keen on hearing your words of wisdom of mining during a bear market. Of course, we'll get into some content creation stuff, I'm sure here and there as well.
Carter: Yeah, absolutely. Yeah, it's good to be back, man, thanks for, you know, shooting a message over and asking about coming on. And, you know, I know, you probably saw a couple tweets out there. Usually, when there's a pullback of any sort like this, you know, people start kind of like, okay, what's going on, and maybe it's their first time with the volatility that happens in this space. And for a multitude of reasons, it actually doesn't matter. And this is one of the things I was telling people like, it doesn't matter why it's pullback, sometimes it's like, it's always happened in it. Sometimes it's because, you know, China's banning something or somebody says it's gonna ban something or, you know, like, in this particular instance, I think there is some correlation to some of the tariffs stuff that went on, right? At the end of the day, it's it's been a cycle, that's now happened four times. And nothing in it in that cycle. The way I use it for just, I would say, conference variable for me is did anything fundamentally change in the architecture or the code and anything that made the original value propositions on the FOMO? Side happen? Did any of that change? And the answer's no, like, the same rationale is there the same understanding from a being a permissionless decentralized system, from when we're talking Bitcoin, when we look at the innovation, love it or hate it on the NFT side, or the defy or any of the defy regions, and all the stuff that's going on from the development side, on the other, I'd say kind of side of the fence on the cryptocurrency side, it's still happening, people are developing things, you know, with with good intentions, most of those folks that you see a lot of stuff are trying to change something they're trying to answer the mail on something. And then of course, you're always gonna have the negative, you know,
Carter: Folks that one might not have experience and just try something and they unfortunately are trying and production as I would call it, and people buy into it, and then it fails something like a terror thing, or you have just straight up malicious actors that are always going to be part of the game theory in there in a decentralized system where people are going to try to take from others, right, I think you're gonna have all of those kinds of factors. But none of the core setup changed, right? So when I see a drawback like that, what I tell people is like, you know, you hear this expression a lot it is, and it's, you hear it a lot, because it's happened a few times, and people zoom out and look at those cycles, right, and understand that, hey, this is part of the cycle. When you're doing anything with cryptocurrency in general, especially if you're doing on the investing side, or you're looking to invest in the space, in general, from an infrastructure or something like that. The calculus shifts on you, but maybe maybe it works out in a way for you to enter the space now, because it is cheaper, and have confidence that those core values didn't change, right? I look at it different. It's been, you know, four cycles for me. And we've documented that process on the channel a lot. And part of that is that understanding with even more confidence in this cycle than the other cycles, right, is that there is a massive amount of people entering the space that want to be part of it. And it isn't necessarily for the Hey, I'm going to the moon thing it is literally because they're making fundamental change on the way we look at finance and fintech and the options that are out there. And we're seeing more and more now they're lightnings made a lot of progress. It's strike, you have all these other apps, you have governments in other countries, making institutional changes, you know, Panama, all I know just did some stuff with making no capital gains on Bitcoin. So you have, you know, El Salvador, you have all these things in this cycle that's occurred, that's now move the needle further. And what I would say is look at these changes and understand while maybe they're not in a large market country, yet, they're institutionalizing and changing the fundamentals, right of like, what's going on there. And all we're gonna see is a cycle happen again, where people start to understand why they gravitate back to it, and then you'll start to have that run up again, and now you're gonna have more adding on to the crypto space. And that's what I would say from a very top level, as I understand it comes in cycles, and understand that the fundamentals really haven't changed. So there's a few different places we could take the conversation here and we normally don't do price talk, but we'd stay there for a second.
Foxley: It's been trending downward since November 16 $1,000 was a high incident pretty choppy since the Terra Luna thing that day definitely took Bitcoin down quite a bit. That might be the most notable Down Spike of the last six months or so. I mean, there's definitely some other other moments right where we saw some. I don't know what you want to call like, Flash bikes down. But Terra Luna de Was that like a Tuesday or something? Yeah, it was like midweek.
Carter: I know, I was getting pretty much lit up and everybody like, Hey, what's going on? I had some acquaintances and stuff that were in Luna. And they were, you know, obviously trying to understand what was going on, there was a lot of confusion of why it was going as fast as it was. And then like, is this what I mean? Literally, I have a tax that was like, Is this what a rug pool is? I had no idea right? What was going on? I'm like, No, I don't think it's that I think there's something else going on. A little more, very fast, macro level thing that's going on with a coin, and I'm trying to adjust for the peg. But I honestly didn't really track too much of what was going on. In Terra at before that, right? I was, I saw the experiment. I saw the the risk when you're trying to algorithmically do it. And this is part of the game theory that's out there that it you know, if somebody took a large enough hedge against it, you could create this, you could create an event it was just Is it too big to fail kind of concept. And I think that there were people on that side of the fence that was thinking that you know, 80,000 Bitcoin was enough size to not have it disrupted it was like a poison pill. I think it's been obviously proven that that was not the case. And I would call I would cautionarily tell that anybody that tries to build something like that, based without those, you know, the core fundamentals and you're basing it on just rest of crypto and that it's probably from the beginning, it's it's on, you know, stilts or glass house, right. So it's like there's a lot of things and a lot of other not even just a straight malicious try to take it out. But just other ebb and flow effects, maybe downturns like we have every, every two years within the, you know, the four years of the halvings like every half year, we always have like a downturn, like your pull really playing or a volatile potential asset to be your stilt, you know, and, like natural pull down could have affected it, and destabilize it, maybe not from 99 to or you know, from $1 all the way to zero, but maybe it deepfake did, and they couldn't react enough. But then they kind of had it at like 50 cents, right? Or, you know, like, I think that was part of what the concern was early when I looked at it back in February and early February, beginning of March, when people were just following it and seeing it go up. And I was just, you know, just like, yeah, no, it's not really for me, I was trying to find all the different arguments on it. But, you know, I like things that are a little more tangential I can touch and feel on that's why but proof of work has always a lured me back. Because I have a little more engagement with the network in a way that you know, I can participate. And I know that I know the business rules, I know what's going on with that machine is doing something and I get in recipient of that of that effort. Now, I take a hedge risk on difficulty going up a lot. I take a hedge risk when price coming down and not making that piece of equipment, not generate enough yield if any USD value to cover for its power. But I there's a calculus involved there. And I think that is the only thing that matters at the end of the day for that right. I don't have to now worry about too much more. Unless those fundamentals change or public sentiment in general for the entire crypto space, worldwide changes, right? I think that's really what it is. People were like, well, no laws can be made and that could sack the whole earth and I'm like walls have been made in multiple countries to the point of the worst existential law I've seen. It's completely banned. You know, I know we've had it in India, we've had it in, in China large huge pieces of this planet, like banning it and every way possible cutting and rolling pins over you know, s 19 R s nines remember seeing that, like it didn't affect it. Right. And so I know that no one country it's those those core values of what makes Bitcoin Bitcoin, you know, no single point of failure, right? You know, everybody has a replicant of the node that runs a node, and I can, you know, it's that, you know, entire ethos around it, that keeps its instructor so I have calm I look at that as like, as long as that doesn't change, and somebody's made an effect of that. I think we're we have a good solid base, and then now I'm looking at variables that now have ebb and flows that are pretty centrical on their cycles to where I can say Well, I know there's gonna be a draw down. So what do I have to do? What are the things I can control, I can control what I will pay for power because I can go other places. And that's been kind of we can get into that a little bit as we're trying to scale up our own operations is trying to find the lowest common price that we can to compete. And then I can also control you know about turning things off if I need to, or take down half the farm if I need to, for most hedged potential, in a worst worst case scenario, you know, like, so I like things that we can control and we can hedge against. And I think that's the easiest and most simplest for people that they always come back to it. It's like, I got burned in crypto, because I yellowed in the some NF T's I got whatever, but then they come back and be like, Well, I'm still attracted to it. Well, you're attracted to it, because it's permissionless. Yeah, it's kind of just there, you know about it. It's, it's not you can't forget about it. It's there. And you'll hear more and more develop innovation on it. So yeah, I mean, that's, you know, the strength I think of that network. Yeah, definitely. And we can get into that more I want to start off with your, your point from earlier, you've been through four cycles now. So I'd be curious to get like maybe the emotions that the first cycle where like for you, maybe a lot of people who are listening to this podcast are new to Bitcoin mining, you're feeling very similar to your emotions during a time but what was it like? Assuming is the 2013 bear market are correct me if I'm wrong 20 So I would say I guess it'd be fifth because so I was there. When I started mining Bitcoin, when I really wasn't even paying attention attention to price as much because it was late 2010, early 2011 It was a matter of just get trying to get the coins. And I was, when I first discovered it, it was more like a because I was doing a lot of Folding at Home and Folding at Home had a leaderboard. And it was more about the concept of just getting in earning winning a block of tokens, it was the game theory almost right so it wasn't even the fact that I could exchange them for anything, at least in the late 2010 early 2011. And then as we were able to put different types of hardware because mind you is like CPU it was just moving I found it the moment it was the first few GPU outputs were made so there was a CG minor there was an SG minor there's a couple old school miners that had got released and I got that brought in GPU so then it was a matter of like Hey, what's this hardware do it wasn't even about the money and well honestly it wasn't it was idea of like just getting tokens and that you could exchange them but they may have value at one day. I remember looking at price the very first time was on my birthday was November my work is numbered 15th of 77 So November 14, I was looking at like maybe I'll maybe I can buy some more because I'm only earning so many mind you that was like 50 coin blocks. But I was like I want to like a lot like how can I get more of these tokens and can you buy them anywhere and there was no marketplace? On November 14 an OTC I saw OTC trades on BTC talk and they are going for about $2.50 a token right so to give you an idea, like 1000 tokens was you know about 2500 bucks 1000 Bitcoin so it was like that was my first concept of like, trying to attach a price to it. And then you we had a run up up to through 2012 is right, like February of 2012 is when price really got a spotlight on it right it had ran up we had done the having it went up to $212 in February, I think CNBC and people started covering Bitcoin and that's when it was like, it went from like two to 11 and December and from December it went up to $200 it was like, wow, this is like a lot. And when it pulled back down to like 50 ad dollars, and then it sat at 100 for a little bit that was the kind of the first like, oh my god, anybody that just wanted it 200 Just lost half that more than half their money. And is this thing a foul? Right, and I think that was the first was articles in like 2012 the firt like this just killed Bitcoin, like it's dead $50 It used to be 200. And that was like that first kind of emotion like, because I remember that's I made mount Gox account had bought on Mount Gox then, and I was like I you know, this was a bad idea. Like maybe I shouldn't have done that right. And I was in where most people I think now our if it wasn't our first time buying in this last run up, where I think there's an emotional thing where you start second guessing everything because you don't understand enough about the network yet because you just haven't had enough time to understand and explore the basic not even the basic the concepts of this whole premise of what Bitcoin is. And then there's a lot of other tokens there that try to take some of that attention and say hey, we're better because we do these things. And you're just more kind of in it like a like a token casino almost of like I'm just gonna pay like these few and hope they win type of thing, like you're betting on horses in Vegas type of thing. But like, when you start to really realize that functionally, it's able to do things quicker, faster. And with that, and what I mean by that isn't everybody takes it right to the, the transaction time between two points. And I look at it from if if I'm dealing with any large amount of money of any sort, like a couple $1,000 to send to somebody or I need to get it to somewhere, like, I could do it through cash app, or some of these other things that weren't available back then. And that time, it was just that was unheard of like to do that kind of movement of you know, transactions couple $1,000. And in Bitcoin. Now, you can do lots much larger transactions with that, I mean, with you wouldn't need 10s of 1000s of Bitcoins, right, like the the size of bitcoins gotten to such a value that now you can have huge transactions, right? That are that you don't need as many as bitcoins to do with it. I think that everybody comes back to it, because you realize that this is functionally different. But yeah, I think that the motion wise, you get into a place that you have some doubts, and you because you're, if you're stuck in that kind of concept of, you know, it's just another feature like a Cash App is going to go away. And I think what gives me solace on the network is the fact that I know that it's just not going to go away, I know, one country can't knock it down. And that there's a lot of, there's a lot of confidence in that, that builds and understands that eventually, they'll figure it out, it'll be in another cycle, and then you'll hear you'll see a lot of other stuff be built. And you know, I think that's what it comes down to. And then like the 2013 2014 phase, you're going to remember it went from 100 to like 300, it had a brief period to 1000 $1,200 before the mount Gox crash.
Carter: But you know, that November, these are always windows, right? Think of like, every time you see the peaks, they're literally like a month and a half window, right? And it's like, it goes crazy. And then it's right back down. And then those are those upper peaks, I rarely said shorter this last cycle where it sat at 50 for like more than a couple of weeks.
Carter: And then it kind of grew to 40. And then it went back up to you remember, it went all the way down after China thing, it went to 63. And then it went back down to like 29. And then it went right back up to 69, like a few months later, and then it sat at 50. And then it kind of has done its thing to where now it's been holding 30 For as long as it has. It has these like crazy peaks where it just goes parabolic. Andaoh, you know, I think that that emotional roller coaster that comes with is what creates all that stress, because people buy the FOMO. But like, if you've been in it for a while and you continue to do that dollar cost average, I think it'll give start to give you more confidence over time, as you start to see that your costs, you know, the amount of cost that you've put into it, kind of tear out a little, because you're buying it a little lower, and you're causing your average to come down some. So then when it peaks back up to that, you'll get, you know, from out of underwater, if you were buying it at 63 and 65 and 67, you're like it's going to the moon and you just keep buying and then when it starts collapsing, you may buy it a couple more times, and then you freak out and now you're at 13 You're like oh my god, it's worth half of what I spent into it. Whereas you keep that kind of any kind of residual income that you have, you're buying it now it starts to average that out and saves you I think a lot of stress when it starts to make that move back up again. And, you know, nobody has a crystal ball. But I would I would say is I have I have let's put it this way. I put a lot of my time and my youth like we were laughing about this the other day, you know, being in this space since 2010? Well, I would say realistically 2011 Like I discovered in 2020 10 on a machine and a single machine. I expanded that and 2011 into multiple machines and started trying to figure it out. And then by 2013 I've made a YouTube channel on it. Right? So it's like the the all of that time the one thing I've learned is the consistency at least in the fact that what it does and what cryptocurrencies bring and what it's made. It's delivered on many promises of what it said it was going to do it we're at 12 years. And it's it's built an entire industry. Like it's not going away. There's this massive energy. There's people that have worked in this space now for eight plus years, right like like in a like operations like they've had, you know, I was looking at a couple resumes we were looking at a few things were our big site build out and it was like Some of these people's experience have more in this than like their previous experience, right? And I look at my own experiences of being in the enterprise and like a third of my entire career is crypto. Right? It's crazy, right? So it's like, this is an industry, it's not going away. And people understand fundamentally, they're building on top of it. So I would say from all of these words that I'm saying is have confidence and what that foundation is, and understand that there are lots of people building during these bear markets. And then that's the fruit of that labor that gets seen as things start to get deployed on that run up. Because if you look at this last run up, think of what happened on this last run up compared to the previous there's one back in 2017. The run up what happened in November in December, everything was froze up. I don't even know how the price got to where it was because nobody could join a network. Nobody could have Meaning nobody could join a financial institution to put money into it. Coinbase went down by Nance was just starting Bitrix froze up Polonia X didn't work. Kraken died, like everything was broke on that 2017 Run up, right. And everybody because remember, the jokes were? Well, Charlie Lee got out at 300 bucks. Right. LTC when he worked at Coinbase, of course, he got out. Right. So like, like, nobody could do anything like that run up was up. And then it was down. I remember having that conversation North American Bitcoin Conference in 2018. Right, because I was in January. And I remember having that conversation always like I would you think about that peak, you don't think we're gonna hit it again. I was like, I don't know that. How did you guys even get in or do anything to lose? Like, you couldn't even get logged in anything, everything was froze up. From that run up to look what we just did, where it was easy, like things Robinhood and Coinbase always seems to go down in inopportune times. I mean, it's kind of the rolling joke with Coinbase. Right. But like, like, there were several services that were there. We had Robin Hood, we had Weibo, we had all the different exchanges. You know, they had a lot more rules on them, right? We couldn't go yet you go to buy Nance, us if you're in the USA, you know, a bit Max, there's all these different entities out there that that were liquidity centers where you can get in if you're a retail coming in. And then you had a lot more other expanded services on the defy side that wasn't there either. So then if you were earning tokens, you could convert them using you know, of a curve, all these other features and functions to really drive up the price from a from a supply grab standpoint, right? So that was already an order of magnitude innovation on top of the crypto network. What do you think's happening right now, everybody, and every one has seen that growth and then tested the machine. And now you're having that amplified, because now you have data on what happened there. And people are like, okay, let's learn from those experiences. And then let's build it better. And you're seeing that expansion happening right now. So those are the companies that are funded, that are in and or raising that are building out new networks, new adapters, secondary layer stuff, all of that kind of stuff. So then on this next run up, it's going to be there's going to be another level of confidence and an ability to maybe law clarity, you have find out find out what fidelity financial services now allowing people to come right out their 401k has turned into Bitcoin that may go into market basket stuff, too, right? You have all of these other institutional clients now, I think, on this next curve, that are building to then per supported on the upswing on the other side, right? So there, I look at it always from an infrastructure standpoint, mainly because of the crypto mining side of it. But like I look at it also from a development infrastructure being my other hat in this world is doing large development projects. So it's like, I know the developments happening. And that's why I was very critical this week to Aetherium. I don't know if you saw that tweet to Tim Benko and the Etherium team that kind of started a little storm in our last video like 10,000 views pretty quickly because it was like calling them out on it. And it wasn't a call at the theory and development team. But it was the same kind of thing. There's certain behaviors. When you talk about integration testing and stuff. I'm being critical of them to make sure that they don't mess up a $400 billion network. And I'm not seeing certain things I would like to seen like open ceasing. Yeah, we've tested we're good. I'd like to see you know curve. I'd like to see Dow maker, or maker Dow come out and say yeah, I mean, we've tested it, we're good. I haven't seen any of that. It's like oh, I got money in there. Like I don't want that to go like South like like there's it's not it doesn't have the existential risk like Terra did however, it does have risk and it does have liquidity pools. And if you have a run on the bank on one side, you're gonna liquidate you're gonna kill the other side right so like there's a McCainand cool things that happen. So like, I want to make sure if confidence goes down because something freezes up an excitation on their network. And even though the consensus layer should have nothing to do with the state layer of the, you know, the main chain, it still stops blocks being produced because they can't get three consensus. So then invites brings down everything else. So they're missing the point, they're on the engineering technical side thinking, Well, no, it doesn't even it doesn't interact with that. It's like it's the consensus layer that ensures that block production on Beacon store. So if something happens there, you're gonna break the whole thing. So like, I need to make sure that if something they're doing on the smart contract side doesn't create some kind of weird thing that then breaks your ability to produce blocks. Like you should integrate tests like this is not an ill is not a devoid concept. But like, that's just the software had on me. So anyways, that's, that's why I'm passionate in the space to make sure people are doing the right due diligence considering the amount of money that's in this network, and that they just do their homework on it and do it right. And that's all you can do. You can't you can't protect against everything. We've seen many networks have issues. But I would say if you take everything I just said because I said a lot. It was like a word soup And under understand that all of that stuff is in mechanical pieces that are driving this entire industry. The fact that we're in a dip right now has a lot of macro and institutional things that are happening and some people may be attacking like a luna Terra thing. And it's caused some pull down and drawdown but I would say look what happened after that drew down, it went all the way to 25k and it bounced right back up to 30. And it's been holding that 30 ahead of that for a while. So we took a massive $40 billion in theory in reality it's probably a couple you know two $3 billion dollars of actual look liquid cash that got moved in the system hit to Bitcoin 80,000 Bitcoin being liquidated some of it on spot, and it absorbed it and bounce back. I think that gives you more than any enough confidence that this industry is not going anywhere. And yeah, I'll let my word soup stop for a minute cuz that's gonna be fun to digest, but it's good stuff. Really good stuff. For me, my dude.
Foxley: No, I want he's seen you on the on the live stream is familiar with it. But that's why you get all of these, right. It's, it's good stuff. So staying with the same line of conversation, we talked about the emotional elements of bear markets, can you speak a little bit to the mining side of it right, a lot of people they buy a token that might be the first time they get into it. And they see like, the price of whatever token they buy go down 50% 60% In some cases, 90%. Hopefully, you're not down all the way down there. Mining is a little bit different, though, right, because you're buying physical piece of hardware, you bought some infrastructure for it as well, you have a PPA that you have to pay for. And now your cash flows have dropped substantially. The cash price is below 15 cents now for a Bitcoin ASIC and for most machines for most like higher efficiency machines, I should say, That's a rough spot to be for a miner. And we've seen in past cycles, miners have a hard time, right? Because miners typically are almost like a high beta play where they do really well when bitcoins doing well, but they do really bad when bitcoins doing bad. And a lot of people lose faith. So from your mining perspective, I would be interested to get some words of wisdom. Yeah, so I mean, I think it's, it's very situational to a couple figures if you're doing it personally, because it has to do a lot with your ops cost on your power cost. So you have your sunk cost and your cap, x being your miner. And if we're talking Bitcoin, and if you're paying, you know, you know, 13 cents right now for your power, it's essentially flat. I mean, you're not making hardly anything, you're, you're you're making yield, making Satoshis.
Carter: But in summer months, it's hard because it's also, you know, it's situational, where it's in the winter, you can justify cuz you're like, I don't have turned on my heat. You're getting heat from ASIC, I got a duct in here, it's great. So what then I'm only making even or even paying, maybe, because you're just you're earning yield, and you're looking at that at a later time, it may be worth more. So even though you're only making $15 a day, $16 a day on that thing, and it's costing you maybe 950 to $12 a day and power. You're getting heat out of it if it's in the summer, and now you're also having to cool it or it's just inconvenient. It it makes you have a decision point. If you're a local home miner, you may or may not turn that miner off for that time being because it's just not worth it. That particular expense. If you've have a situation where you're like hosting it somewhere and your relative power cost is cheaper and you have hosting fees, essentially it's just you're staying even at least you're We're still getting your stats on it, or you may come into the negative a little bit. And in 20, what I would say is that those cycles don't tend to last super long, we did have a pretty long bear market in, in the last one where we went from recession like 2018 through mid 2020, as two and a half years, it's a very long bear market. And you still had a ramp up on these various networks, the Bitcoins still grew during that bear market. And that's what made it more bear for people. This is why getting your power costs is hugely important. down to where it's cheaper. And then you also had a huge kind of run up you had in that with like a cerium. And the alternative mining stuff like you had developers also reduce the emission. So you it was kind of a double edged sword here, where you're, you're, that cut you both ways. Like, like, you're getting less and less anyways, because the network was growing price was roughly flat or two down, and they, they they reduced the emission, unscheduled twice, right? So you went from five to three or five to four, right at the peak, and then it started dropping, and then you went from four to three. During that time, or no, you went from four to two. And you have, like, no. Like it was, you know, it really hurt. Like in March of 2020, we're not at six box, it was at like 300, right. So like a majority, you look at the network, that network started to peel hash rate at that time, it was at a peak of 300 Tera hash when all the way down to like 147. Right. So it halved the hash rate. So you saw what miners did miners turned off, it's different with something like Aetherium, I'll split the two networks because it is mining thing with like a theory of miners, especially a mode, there's only a few institutional Aetherium miners, the majority of miners are maybe bigger shops that have like five to 10 Giga hash. Because it gets it's, it's a lot more task intensive. If you're going to try to do hundreds of giga hash, you need a lot of staff, it's just miners have problems. On the east side, on the Bitcoin side, you can grow to huge scale like warehouse like, you know, Argo, or you look at core scientific, are you looking at it, these large super shops, can can really scale to a really big, you know, multiple Peda hash in size. So hash, almost full exa hash, like it's all 1500 Peda hash. A lot easier to maintain. So that like, if you're the home minor version of that, like, you know, two or three, like, again, you got the sunk cost in the hardware, you might have to power down if it doesn't make sense for a month or two. And all of our time, well, I've had two times that we've had, quote unquote, shut down our farm up in Wisconsin, I talk on this show on the channel a lot, when it's full tilt 56 Giga hash going and we have almost 100 ASICs now up there. When we had 54, a six, and then almost 68 hash, we had to take some down because we're out of power. The we were about 23,000 a month and power cost, right? So that's something that if you're not, and my goal was never to sell 100% makes no sense, right? So that means I'm covering something out of pocket for the whole the yield that we want. So when we come close to zero, I'm paying essentially more into it, I'm adding more into the power costs for I can hold the yield. And so I'm looking at it from an expense standpoint that I'm buying cheaper Bitcoin right now I'm buying cheaper Aetherium as that were to because already have a sunk cost asset, earning me some of it, right, versus just going out and buying the token, right? Because I already had the asset. So I'm just buying a little cheaper, because I'm earning yield. And you can look at it in that way. How much more is it costing you if you're if you're paying an extra $50 a month in power, because you're negative, I would pay 150 on your power, just pay your power, and then just hold your yield, right? You got it. It's really personal, wouldn't you manage it, but like the whole concept of the thing is that you got to be holding some of that yield. So you might need just paying for a little cheaper Bitcoin at that time. Or it makes sense sometimes with smaller shops just to shut it off and then just buy the Bitcoin what the key point here is, is that you don't want to I've always done it personally to where if we've shut down the farm when we did in March of 2020. We just shut it off and we treat it as a maintenance event. Right? We shut down in 2020 you had $86 eath price you had $3,000 Bitcoin price didn't make a lot of sense to run anything right that moment for us personally in our situation and our power costs. So we shut it down, but we still use some of that extra money that we were going to invest into the place and we just bought crypto and then we just used our time for them. Maintenance of it right? So I think what it is, is you gotta get your place in your mind in a place that that makes sense financially for you and understand if you're if you have a plan that you're trying to earn a certain amount of yield, or you're trying to earn a certain amount of bitcoin over a period of time, because remember, when you're when you're building a farm, you're looking at what's this unit going to give me? What's the output of this thing. And some people look straight at the USD, I've in the origination of mining, like I said, Before, it was all about the yield, there was a point at some point when it started going up in value, because it's very tangible. And I can use money at that time only I couldn't use Bitcoin for things. It was like, Wow, this thing might actually earn me a lot of money. And that was why I bought like a raspberry jalapeno, I'm pointing to something you guys can't see because I zoomed in, but like, there's a little box here is doing etc, we're gonna do a review on it a little bit, but like, like the jalapeno is a little eight Giga hash box. That was like 300 bucks in like 2012. And I think I got it in March of 2013. It was I bought it in like November of 2012. It came out in 2013. And it would earn every day, point three, almost point three of a Bitcoin. Right, mind blowing. And at that time, I was point oh three, it would be 1.33 a month, which was seemed like it wasn't that much. But point three, three a month at that time was a couple 100 bucks. And I was like, hey, the ROI on this thing, if I can get it point three is a pretty good return. Now the reality of it was is it ran for it was you know, I want to say it was maybe 150 Watts, 200 watts. It more than paid for the power at that time, which was rare because we were using very expensive GPUs and a lot of power 1000 1200 watt power and not earning that much. You know, a rig back then to give you an idea was about 300 Killa hash per card. And if you had, at that time, there weren't really six card rigs just motherboards weren't made for six cards, then I'd usually have to like like the crossfire cards, or I'd have three I think I had one ring, it was a three card. I had built a crazy rate was a 7970 or 6970. So I had three of them on one machine and that was roughly right underneath one giga hash. Right so this machine was eight Giga hash for 150 watts. So there's a huge difference right ASIC to the machines but that those three cards would earn point o nine Bitcoin a month so like it would take you 10 months essentially earn one Bitcoin and that machine a little over 10 months 11 months of the graphics card machine and we saw the hash the difficulty going up to the moon anyways, we knew that it was going to go to these these ASICs but that was where I kind of looked at like maybe it makes sense maybe I maybe buy some coins because I was looking at trying to sustain this yield I had a goal a yield goal. And that's why I say it's like if you're looking at the charts and you bought a machine because it was going to earn you a certain amount of money over time, then do the calculus of that and say what do I have to put in to manage my original expectations so you already bought the machine you got a sunk cost I understand you want to run it but let's keep with your yield goals. And then when Bitcoin starts to come back, you're gonna be able to turn that machine back on because it's always out runs it always it has its dip where it hurts miners, but it always front runs back up. And when it has every time like think about it this last run up people were turning on like, like spun dually texts from 2014 right five Giga hash machine that use like 2300 Watts, or a five Tera hash machine, sorry, five Tera hash, which was like one I 20% of an S nine at four e 5%. more power than an S nine they were turning those on, right I like 69,000 or Bitcoin and make that still profitable. So give you an idea I actually have an SP 35 sent around. And I did not turn it on but like I was running out of power so but that just gives you an idea of like your pot your your your asset, eventually we'll be able to start stir still earn yield, but don't lose the passion and the idea of what you were trying to do on making up that difference in SAT. You know, purchasing. So if it was $15 a day, right now generation you buying an extra $15 a day then by $15 a day and your autobuy you know, through uphold or whoever else that you use and try to get it now you're gonna pay fees and I know that sucks. But it maybe you do one purchase that's $15 Every day right? I mean, just one time for you only pay one fee. But yeah, that's what I would say. That's the way we do it. I mean, I look at it. I've always looked at it that way of just it's about stacking SATs and yield and then it's also being a participant on the network side. have, you know and you don't have to run everything, it's the same way I always tell people like switching networks from, from like a CRM to like Raven coin, and that are upset that their cards are going to overheat or whatever Decart does, 120 You don't have to do 120 Like, like, have it down like a cut, cut your power down, some use half the power participate. Yes, it's not the most efficient for your particular card, but you don't have to run it at full total if you have five s nineteen's and doesn't make sense drop into one still be participating. But like, you know, make it manageable within your budget, and still protect, you know, still be part of it. But you know, again, it's it's very situational to each person, if they're closest to solutions and stuff, you know, that's a little different, but like, because it's deployed, but you can always use most of the time, you can usually request those assets back and again, part of the reason for mining is you bought an asset that you can also if it doesn't make sense in your situation because your power or maybe it's just too expensive. Maybe you take some of that sell that particular unit come back in you know, to just coin and hold the coin in that particular situation. But you know, these these things go and like up to two and a half year cycles. Hopefully we're not going to be in a two and half year cycle. I don't think we are I think the nurses a little different on this one. Maybe it goes into their six months and then we start to see some kind of you know, push back up, but that's what I would tell people that's what I tell people right now that's not just what I'm telling your audience that's what like, I get people in my office and yeah, like hey, man, like, what's going on here? Like I'm not making anything anymore? And it's like, well, you know, how much what's your power hos first question?
Foxley: Yeah, 15 cents all and yeah, I like your your way thinking they're just if you have an end goal with your miners, then shoot for that goal, no matter what. And if the spot price is better than mining, then by all means go and buy that and over time, you're more than likely to get that income back in order that spent money back in terms of Bitcoin depreciation or whatever coin you're holding for our audience Bitcoin. But we do talk about other coins here and there as well, just because it's all mining all the way down. Curious to get any tips for newbies in the mining situation right now. What I'm thinking is like, maybe you have any ideas about like renegotiating PPAs, you mentioned turning off miners, if you have any tips for home miners, and how they could use energy sources, just any tips for a bear market? That'd be really useful, I think.
Carter: Yeah, I think and I've said this a few times on the channel, we have people that do just direct consulting with us too. And what I always tell them to I usually give all this information on my channel, if you want to, for the dedicated time, no problem we can dedicate that to. But what I usually tell them is that first off, you got to reach out and see if there's a better rate that you can get does not hurt to ever make a call. I would say if you're a heavier user, when I'm saying you know you have a 510 rigs at your house, there's a chance that you could have an opportunity to getting a better commercial rate that may make you have to just set up a sole proprietorship something like in the US, you could set up a sole proprietorship you come into like a commercial rate, because now you're doing it to your sole proprietorship. And the way we've structured them is you're doing a service at the end of the day, you've made a relationship with the Bitcoin network, you're upholding security, your sole proprietorship, at the end of the day, you're a security provider for the Bitcoin network, it's not complicated, it's actually legal to like you have created a entity to uphold bitcoins network, and your uh, pay taxes accordingly, you're gonna, you're gonna report accordingly. But you set it up to in the whole pullet premise is the baseline that you are trying to improve your base cost power rate, because you're a service provider. And that is what I've, what I've worked with people trying to set up that had been trying to set up stuff with that of because they're like, Well, what do I set it up for? Like, I'm just mining Bitcoin, like, why don't I make an entity? And it's like, well, you're doing a service, that service contract agreement happens to be the Bitcoin code. And your payment for that service is built into its operation, right? So you are supplying security, you make a sole proprietorship, that because you're a bitcoin miner, it's a legitimate business. And then you go for that commercial rate. If you look at most residential areas, like on our particular area here, it's about 11 to 12 cents in some areas for home rate, commercial rates, nine cents, and the coop area where we're at, it's a lot better, right so the home rates about nine cents. It's a co op. It's a deregulated Co Op setup. And the commercial rate can get all the way down to seven cents, right? And that's like, direct and that's like what your rate is. And that what that means is your power, actual energy rate is actually about five cents. And then you got state taxes and got all that other stuff. So all in it's seven cents. And that's just like, you don't need to be a large consumer. Part of that's because of where we're at and I'm in the I'm in Illinois, is they have a lot of excess power. When it comes to the windmill side, if you ever south of Chicago and driving down Highway 55 headed south to Southern Illinois, you'll see C's upon C's of windmills. And you'll see about half of them off right now. Because they I don't want to say the overbuilt but there was there was a lot of innovation since 2018, to try and drive to build out the renewable infrastructure. The Midwest, in general, is a very large infrastructure set up for this, but it's all a transmission issue. They overbuilt, they got that done quick because it's very controllable. Transmissions a lot harder. Transmission has issues because you build all those things. And then you try to move it you got across a lot of people's territory, hundreds of zoning issues, you have to agree with people like hey, man, you're in this awesome part of land, and I need a line to come over. It's kind of by your house, I know it sucks, but let us pay some and then it gets locked up in court because you don't want that or whatever. Right. So there's a lot of transmission issues, but the overbill because it's easy, because it's in one spot, a lot of windmills. So in at least Illinois, I know Wisconsin, or we have our farm BBT farms up in Wisconsin, our expansion down here is gonna be in Illinois by the St. Louis area. The you have entities that that have a lot of excess power. So what's happened is, is their ability to sell that to a larger entity, all comes down. If there's already transmission in place, do you have substations you have any of that kind of stuff. So if you're a medium to good size, farm, look for other participants that maybe are also miners, join a local groups try to find out, hey, are there any other miners and maybe do a colo together and try to get a much more better rate, you can get down energy rates, your energy rate prices in the Midwest, I'll give this North Dakota, South Dakota, here in Illinois, you can get down to an energy or rate around three and a half cents. Now you go to all in your around five and a half to six and a half cents. And that's came up like when we first started looking at it, it was cheaper. It was closer to three and a half, three, seven all in or you're looking at energy rates down in the twos. But yeah, gas go up in price and a couple of other things. And then there's there's also tearing with that most of those to get into that like four and a half to six cent range. You have to be at like five megawatts or higher. But like seven cents isn't completely out of the question in this area. And that's what I was saying is like, there's people I know that follow the channel and I say, Hey, you can get these rates in Illinois. And they're like, Wait, man, I live in Illinois with that all so then they'll make a call. They're like, Oh, yeah, got a commercial entity. Yeah. And then they move the rate from 14 cents to seven from a phone call. So I'd say very, very, very, very first look on your bill, who is it? And then ask them, Can you send me the commercial rates. And if the commercial rates are substantial, find out if you can get an entity set up to then do this in the commercial side, it's going to save you in the long run a lot of money. Residential is a little more tricky in an unregulated markets even more tricky, and if you can't buy it from anybody else, you know, type of thing. There's some issue but like, I would just say that and then if you have a medium to large sized farm, it might make sense to move it. I mean, that's when we didn't, I did not want to move it up to Wisconsin, like back then they like we live down here. So it's like, but it made sense. At that time, it was almost half the price at the time. So it was like, because we started scaling up right in 2016. So it was like, Well, I got some I went to Wisconsin for the for the farm. But that's what I would say is like if this is what you're doing, and you're doing at any kind of scale, just look around, make a call, it's worth your time. And it's an actionable thing you can do like if you're looking at the price and you're mad, you're like oh, what the hell I was promised myself that I would make this nobody promised you anything. So you promised yourself that like if I bought this and this calculator says it makes this is what I should be making. And then realities, you know, things happen networks keep growing and in size. And if price doesn't follow it then yeah, you end up getting priced out at some point but you can proactively try to change your situation. And that's where I say it comes back to the people know I've seen that a few tweet threads on Twitter about calling up your local power agent and trying to get a better better rate. There's obviously been like a big push among ASIC miners to get into home mining and it's pretty tough. Like it's I did it myself and I've had much more downtime than uptime. Probably a lot of on me, but I think it's, it's just part of the game. And as we go into a bear market potentially, and hash price crashes, you want to set yourself up for success. So I mean, getting your ASIC up and getting your power cost down. Yeah, I mean maintenance and stuff. We don't I mean, I tried to cover it a little bit on the channel, we've had a couple of things, but especially with like GPU maintenance, ASIC, maintenance, a little different. I mean, we have, like I said, 100, deployed up up in Wisconsin, and we've had two out of those 100 have some issues that we've had, we had a board go out, everything was fine, and then just decided to stop working. And then you know, the troubleshooting side of that, we actually have a video coming out for that, to show some basic troubleshooting maintenance, it really helps if you have two units, not trying to upsell anybody into two units personally. But like, if you have to, you can like swap things and just validate yourself. And so then when you're filling out the support requests, you can say, hey, here's what I did, I actually took this board and put it on this one, and then everything worked, you know, and then I saw, I know it's the board. And then it just saves you all this back and forth. And then same thing with like the power supplies and these things are pretty modular, you know, a six pin unplug few screws, slip it over to the other machine. On the ASIC side, it's pretty, pretty straightforward. But you know, being able to troubleshoot is a pretty big one, you know, we this is one of the things that's the that's not usually captured is the amount of time that an individual spends, they're mining. And they're not necessarily if you were to try to calculate your, your compensation price of it, you're not making any money. But like, it's a passion project. Like it has to be a passion project type of thing to where it's like a hobby that happens to earn a token. And that token happens to have a variable rate and price at some point. Start from that mindset in place. And then when you've done that with one, I mean, I've done this with several people, people that call us do like, like I said, like our consulting and they're like, Hey, we got we got four investors we're gonna melt we're born invest a million dollars into this. Some people come and say RMS 10 million I said, Hey, you're here you invest like no more than 20,000 Get a couple of miners running and understand what you're about to get into. I don't care how well versed you are on it. Just understand the maintenance, understand the planning, and now we've evolved that kind of solutioning for people to where I like show Smartsheet with like 150 line IMS, which shows all of the things you got to consider. Home miners really don't have to worry about that. But there is a home minor version of that. It's more like around 50 lines on an IMS like you know Sherm just sound and heat transfer and all those other things. But like there's zoning, there's, there's there's so many little nuanced things, if you're gonna get into this. But you know, the potential upside obviously has like that kind of like gold rush kind of feel to it. Especially in times when you're when it's like all time high, right? It's like how many guy get 20,000 of these in a box right now? Right? You know, and the reality is, no, it's not that quick and easy. There's actually massive amounts of nuance to it. That's card, and it has nothing to do with the mining. It has everything to do with like, yeah, regulatory Is there enough power in a spot, all that kind of stuff, but you know, start small and crawl Walk Run your way up is the best way to do it. Yeah, well, that link the link to that last episode we did with you. And Seth remind your biz about crawl, walk, run. That was a great episode. Michael, I want to thank you so much for your time today and for sharing your wisdom for bear market mining really helpful. It's it's an interesting space to be in man. Well, I always tell people is just like, you know, it's the whole zoom out. But take a few steps back. If you have some miners power, I'm down, take a break. Look at him for a second. Reese regained your current knife operation and situation. Run a couple that way you don't have total Phil, that you're like shutting everything down. And then just realize the cycle. And it's okay, sometimes I know, it feels like you're missing out. But it's okay. If you've already made that kind of investment, you only run it in a couple of them just kind of regather and then relook at it, but your mind on? can I improve it in any way? Can I get better power somewhere? Can I you know, and work that let that be where you're putting your attention to?And not so much on the price. Just try to it's, you know, in most situations, it's like continuous improvement, right? You're recycling a few factors, you know, factors here. So just the I would say have confidence in the space, it's not going anywhere. And that, you know, we all live with this up and down price stuff.
Foxley: That's gospel. Again, thanks, Michael. Appreciate it.
Carter: For sure, man.