Bitcoin Mining in Distress with Nick Hansen

 
 

Where to find the show

Download Episode MP3 File
The file will open in a new window. Click down arrow to download the file.

“This time last year, most profitable time to mine ever in Bitcoin; people shovelling money in as quickly as they can. Less than 12 months later, it’s the least profitable time to mine ever. It’s very difficult to make massive strategic pivots in that amount of time.”
— Nick Hansen

SHOW DESCRIPTION

Nick Hansen is the CEO of Bitcoin mining software firm Luxor Technologies. In this interview, we discuss the distress within the Bitcoin mining industry caused by a perfect storm of leverage, stagnant value, huge growth in capacity, energy price shocks and wider headwinds affecting investment. This could become a national security issue.

- - - - 

Exactly one year ago, US Bitcoin mining companies were posting record quarterly profits. A huge amount of investment followed China’s mining ban making North America the centre of global Bitcoin mining. It spurred the development of mega miners: companies developing industrial-scale operations. These companies started building out new sources of energy and developing unique relationships with grid operators. And Bitcoin’s price was at an ATH.

Roll on one year, and the industry is facing a potential crisis. Bitcoin price is at 2-year lows, the hash rate is at an all-time high, investment is drying up due to a range of issues, rig prices have tanked, whilst a swath of companies are struggling to manage debt obligations. Add to this the wider fallout as a result of the FTX collapse. It really is a perfect storm. 

At the same time, companies are being buffeted by widespread disinformation, and polarised attacks predicated on energy usage concerns. Regulators seeking to acquiesce to those promoting FUD, have considered, recommended, and brought forward poorly designed rules. See the NY moratorium on PoW mining using fossil fuels just passed into law. 

This is more than a parochial issue for the Bitcoin community. Bitcoin mining provides an unprecedented opportunity for wider society. It’s the basis for an alternative to a broken economic system and the means with which to incentivise and support the energy transition at scale. It is the industry to help the US navigate a host of strategic problems. Bitcoin mining is, fundamentally, a national security issue. Its protection should be our primary focus.

TIMESTAMPS

00:01:48: Introductions
00:04:40: The economics of mining
00:12:42: Growth of the mega miners
00:17:16: Peaker plants explained
00:21:38: Difficult times for miners
00:30:05: Transaction fees, and impact of the China mining ban
00:33:41: Economics of Lightning Network vs basechain transactions
00:35:48: Futures hedging
00:40:11: Growth in hashrate
00:47:31: Impacts of halvings on miners
00:53:56: ASIC Index, and the market for mining rigs
01:04:50: The perfect storm for miners
01:08:18: Market impact on Luxor
01:14:42: Real Bedford FC
01:23:11: Final comments

 

SUPPORT THE SHOW

If you enjoy The What Bitcoin Did Podcast you can help support the show by doing the following:

If you are interested in sponsoring the show, you can read more about that here or please feel free to drop me an email to discuss options.

SPONSORS

 
 
 
 
 
 
 
 
 

SHOW NOTES

Connect with Nick:

Mentioned in the interview:

Other Relevant WBD Podcasts:

PodcastPeter McCormack