Transcript 0:00 It's October, so you know that means our tokens go up. Everything's ripping right now, Bitcoin ETFs, Bitcoin hash rate, even Bitcoin ordinals are skyrocketing right now. Bitcoin bearing down on an all-time high. 0:13 Maybe it already hit by the time you are hearing these words. Welcome to Uptober. This time, we're bringing receipts. [upbeat music] Don't you know pump it up. You got to pump it up. 0:30 Don't you know pump it up. You got to pump it up. Don't you know pump it up. You got to pump it up. Don't you know pump it up. You got to pump it up. Don't you know pump it up. You got to pump it up. 0:38 Don't you know pump it up. You got to pump it up. All right. Okay. [laughs] It's Uptober. It's Uptober. And for those of you who don't know what Uptober is, it's in the name. 0:55 And, um, Bitcoin seems to follow these scary patterns historically, and, you know, uh, past performance is not indicative of future results, but it, it's kinda keeps happening. Yeah. 1:07 And as we are recording this, Bitcoin is tapping on or knocking on the door of a hundred and twenty-one thousand dollars. It is up two percent over the last twenty-four hours. And cinnamon's good right now. 1:21 Oh, man, and you know what's funny is even like... 1:23 I just think like two or three weeks ago, Bitcoin had crashed all the way down to a hundred and seven thousand dollars, and people were posting screenshots on Twitter of like their friends asking them, "Is it over? 1:36 Is Bitcoin going down? Was crypto all a sca- a scam the whole time?" And the answer is, yeah, crypto probably was a scam, but not Bitcoin. [laughs] Bitcoin, we're back, and it- it's wild. 1:47 Like by all these metrics, Bitcoin is absolutely just ripping everywhere, and we are gonna go through those. It's a banger of a month. You can feel it. 1:57 The hair on my arm is tingling 'cause I know, I-- you just know that, like we're, we're gonna take another leg up. You can smell those green candles burning. 2:09 You have an interesting tidbit, an interesting stat that kind of went under the radar this week to open with. Yeah, I'm amazed I really didn't see this. 2:16 Maybe someone else posted it, but this i- this was kind of news to me. So obviously, we had the Bitcoin ETFs open now over a year ago, um- Yeah, almost two years at this point. Two... Yeah, two years at this point. 2:28 January twenty twenty-four. Yeah, and we've known that like Bitcoin ETFs, really popular products, huge inflows, successful out the gate. 2:36 But I think the news story this week that we're leading with is that BlackRock, which is the king of all the Bitcoin ETFs, BlackRock's IBIT, iShares ETF- Bitcoin ETF popped into the top twenty ETFs overall by total assets under management. 2:54 This is crazy because, uh, again, I don't know like the history of like what the big ETFs have been and like, uh, and all of- what all these metrics mean, but, um, here we have on... 3:08 According to TradingView, which tracks the largest ETFs and trusts, but like what, you know, um, BlackRock's iShares Bitcoin Trust ETF, IBIT, just cracked into the twentieth place overall for all ETFs by total assets under management. 3:25 That's huge. Um, like l-look at the ones above it. It's, um, it's, uh, like the Vanguard Total Bond Market, Vanguard Total Stock Market, iShares Core S&P 500. Like we're talking like index-type funds. 3:42 And then, um, also like if you look at these, all of the like the focus of these other funds and ETFs is like total market of a certain category and investment-grade, you know, trust, um, gold, mid caps, and then you have number twenty as its like focus, uh, according to TradingView, and as a category, long Bitcoin, short USD, the twentieth largest ETF. 4:08 Like this is big news, Colin. Yeah, it is. Suitcoin summer has melted into turtleneck fall, where you're still having the same conversations about MNAVs and foreign corporate treasury stuff. 4:23 But, uh, just going back to piggyback on a few things you said there, Charlie, this seems to be the quickest rise to the top twenty of an ETF in history. Um- Yeah. 4:34 I haven't found anything from cursory searches to suggest otherwise, but just an absolutely meteoric rise for the Bitcoin ETF and for BlackRock in particular. 4:42 And I think it's another reminder for me at least, one of the biggest frustrations from traders and Bitcoiners or at least people who follow on-chain metrics, this cycle has been, where's retail? 4:53 And the answer is they're piling into the ETFs. We've said it before on the show, but you know, that has been the biggest retail driver of, of this current cycle, right? 5:01 You obviously have a lot of institutional adoption that's moving the needle more, but the people who are gonna buy Bitcoin on exchanges and do the things that we do have probably been around for a while, and they're not changing their habits. 5:11 In fact, they might even be tapering back and not buying as much because they've made it, right? 5:15 Uh, well, when you have the ETFs open, I just think back to a conversation I had with my boomer father-in-law, where he was like, "Oh, so this is like a check of approval. 5:25 This is kind of, you know, the powers that be in Big Brother and, you know, the traditional financial industry saying, 'This is an okay asset to hold up to a certain allocation of your portfolio.'" 5:34 So I think that has been one of the largest drivers of, of retail adoption. 5:38 It's, it's, it's your older generations, you know, rolling their 401(k)s and IRAs into Bitcoin ETFs or also even just Bitcoiners doing that, you know. Yeah. 5:46 A lot of it to try to max their exposure by taking their 401(k)s and putting them into iShares or another ETF. Yeah. 5:53 And so like you have these instruments for the people who don't care about Bitcoin's unique monetary properties and don't care about having a censorship-resistant permissionless money.Th-this is the same as holding it in an exchange, right? 6:07 Like, you're just in it for price exposure. There's no reason to maybe buy on Coinbase when you can just do it through your Fidelity account. Yeah. 6:14 And, you know, I, I, I'm wont to, uh, you know, criticize the corporatization and, and, uh, centralization of Bitcoin custody, but at the same time, you actually have almost a structurally different product than an exchange. 6:28 It's similar from a, like, someone else holds it standpoint, but also, like, these are much better regulated pure-play products- Yeah... because they guarantee and they prove they have... 6:39 It's basically proof of res-reserves, um, because they don't- Yeah... really have, like, the same kind of liability obligations. 6:45 I mean, so, um, I'm getting some numbers from Bitget here on just high-level Bitcoin ETF data. 6:52 So, um, yesterday, that was October first, so Wednesday, um, the, uh, US bought Bit-Bit ETFs brought in six hundred and seventy-five million, a massive, uh, single-day inflow. And then today on Thursday, 7:09 markets I think just closed, um, iShares alone brought in four hundred and five million on the day. This is significant. You know, like, also if you aren't aware, like, of all-- there's, you know, a dozen Bitcoin ETFs. 7:23 Well, now there's over a dozen. There's, I guess it looks like twenty Bitcoin ETF-type products. Um, and BlackRock alone is bigger than all the others combined. Uh, so 7:35 yeah, this is, you know, it's like the m- it's the, it's the king of all the ETFs, and so- Larry Fink thanks you for your Satoshis. [chuckles] Yeah. Larry Fink. Was it just two years ago? No. 7:48 It was, it was, like, uh, two and a half years ago that he was literally just saying, "It's still a scam." And here we are. [chuckles] His ETF. Owning ETF. 7:58 Um- His company owns the most of it out of any of the ETF providers. [chuckles] Yeah. Surprise. Whoa, gotcha. If you, if you were watching too closely, did you blink? Um, because he owns all of it now. 8:11 Crazy story, I think. It hasn't, uh, made the news yet. When you're listening to this Saturday morning, anything could have changed. Literally, you know, twenty-four hours- Yeah... 8:18 is an age in this- This, this will get picked up, and it'll be used as a explainer for the current rally. I mean, as it is, right? Yeah. 8:25 But I do think that this is the bellwether for where the market is at this point, like what the ETFs and what the institutional inflows are doing, you have to pay attention to them. 8:34 [upbeat music] Hey, Will here with Blockspace Media. Did you know that we have individual feeds for all our shows? 8:41 If you're watching the Mining Pod, Bitcoin Season 2, or the Court Show, be sure to check out the individual feeds. You can find them on your podcast player of choice, whether that be Spotify, Apple, YouTube, et cetera. 8:52 Just type in Blockspace Media and you'll find all our shows pop up. Or just type in the individual show name, like the Mining Pod or Bitcoin Season 2. 8:59 Be sure to hit that subscribe and give us a five-star rating so we can continue to bring you the best content in Bitcoin. [upbeat music] Let's move on to the other metric. 9:11 This is really your wheelhouse, Colin, um, which is, uh, network hash rate. So if you don't-- If you're not listening to the Mining Pod all the time, we cover this a lot over on that, uh, podcast. But, um, mining... 9:26 Bitcoin's hash rate, uh, hit, always hitting all-time high, obviously, but it hit a major milestone of a zeta hash over the past couple weeks, maybe three weeks. Um, that is a major milestone, Colin. 9:42 So it's a huge milestone. I think that Bitcoin mining generally is, like, not explained well and is misunderstood as to, like, what hash rate is. So just a quick primer. 9:50 Um, within each ASIC, there are, um, hundreds of thousands of little goblins that are taking water bottles. You know when you do that little flip thing where you try to get the water bottle to land? Yeah. Yeah. 10:02 Well, the goblins are doing that over and over again, and once one of them finally lands it, they screech, and the rest of the network hears them and realizes that they won the next block. Yeah. 10:12 Um, obviously, that's not true, but [chuckles] the, the fact of the matter is it's actually kind of a distinguished little analogy because ultimately what Bitcoin miners are doing is they're not guessing, they're not making complex math, um, they're not, they're not competing complex math equations. 10:25 They're not trying to, like, guess some secret formula. They're just producing trillions of numbers per second. 10:30 And so when you see Bitcoin's hash rate hit a mark like a thousand exahashes, which is we used to measure in exahashes, now it's zetahash. One zetahash equals a thousand exahashes. 10:39 Um, that tells you that there is, uh, there is one sextillion, uh, guesses happening per second to secure the Bitcoin network. And why this is happening now, you know, why are we just getting over one zetahash? 10:51 The reason is because summer's ending. Um, Mining Pod listeners will know in the summers in the US particularly, where the majority of hash rate is now, or not majority, but, you know, thirty, forty percent, maybe fifty. 11:03 Uh, during the summer months, curtailment and demand response programs are, are very popular within a number of the grids in the US. 11:10 And what these are is in the summer months when, um, you know, it gets really hot and there's a lot of stress on the grid because everyone's running their ACs and activity is pretty high, uh, sometimes the grid can have a shortfall for power. 11:21 So Bitcoin miners and other industrial consumers will shut off at that time, and they'll usually get either credits back for their, uh, uh, future power costs, or sometimes they just have to do it because it's in their contract and they don't get paid at all. 11:33 But they will power down when prices are high, and they'll shut off their hash rate. And so over the summer, we saw hash rates stall out because these curtailment programs were going on all over the US. 11:43 Now, these curtailment programs are ending because we are cooling into the su- into the autumn months, and, uh, hash rate, as Nic Hansen, CEO of Luxur, once described on, uh, Mining Pod News Roundup, hash rate's been like a, a, a balloon held under the water, right? 11:58 Like a beach balloon. Now it's popped back up. Um, most people were expecting us to get to a zetahash this year, some quicker than others. 12:05 We had a really good report from Valrous, so-A Bitcoin mining researcher, um, that basically put it at where it is right now. 12:12 Um, he, he did a really good job of factoring in how the tariffs and other, uh, geopolitical factors would affect hash rate. 12:18 But, uh, the TLDR is summer's gone, weather's cooling down, hash rate is ripping, and it doesn't matter if hash price, which is how we measure mining revenue, is low right now. 12:29 It's at about fifty dollars per hash per day. Um, historically, the all-time low is about thirty-five, just to give some context. 12:36 Um, because a lot of these miners are deploying new generation machines that have really good energy efficiencies, so their margins, even at this hash price, will be pretty good. 12:45 So, you know, we, we expect this to continue to, uh, march upward and, um, this came quicker than some expected. I think for a lot of miners though, this was maybe a little bit 12:56 further on than they thought, uh, w-when we would hit, uh- Yeah... one exahash so. I, y-yeah. 13:03 It's, um, it's, it's funny be- just like to look at how quickly the narrative evolves, um, because, you know, we've been telegraphing this for a couple years in Bitcoin, especially in the mining community. 13:15 Like, you could see people adding hash rate relentlessly. Hash rate was accelerating, even though a lot of miners are now pivoting to AI. You still see just massive hash rate being, coming online. 13:27 But I want to bring up this report from, uh, River from twenty twenty-two. River Financial, great, uh, outfit. Highly recommend, especially their, like, education product. 13:39 But they put out reports sometimes, and here's a report from twenty twenty-two they put out, which I was, like, scrolling through kind of as I was reviewing the zetahash topic, and they, um, had a projection back in twenty twenty-two of when we might hit a zetahash. 13:59 And if you're listening, the short version is they just tried to, like, look at current hash rate growth and, um, and just project that onwards. 14:09 And, uh, that would basically placed, uh, you know, according to that, that heuristic, they estimated that we might hit a zetahash between twenty thir- twenty thirty-three and twenty forty-six. 14:23 Now we hit that in twenty twenty-five, eight years prior to their soonest projection. 14:31 Now they do make some caveats, obviously asterisks, but like, you know, just to like demonstrate what a predominant, um, reliable, like, research outfit put together as a potential projection just three and a half years ago, being, uh, close to a decade off is very significant. 14:54 And, you know, this just goes again to demonstrate that things can happen so quickly. Y-y-you know, this w- they, they published this report during the FTX, the depths of the FTX dow- uh, you know, uh... 15:08 Actually, FTX hadn't even happened yet when they published this, looking at the date. It was summer of '22. So, like, you know, just think of how, how wa- how much has evolved and happened since then. 15:19 And so, um, as Bill Gates says, "We overestimate what can happen in a year and underestimate what can happen in a decade." So zetahash onward. Yeah. 15:32 I think that, and, you know, not to, uh, pile on Sam Waters at River, the head of research, and the guys who put this together because they put together some fabulous stuff, but I think this is just an example of not necessarily fully being able to grapple with an industry that you're not in, right? 15:48 Yeah. Like an exchange put this out, right? Yeah. If a Bitcoin mining company put this out, I would be putting them on blast- Yeah, me too. Yeah... because like there's absolutely no reason why they should expect this. 15:56 But, um, at the... 15:58 To me, the flaw in the methodology was taking a backwards-looking view and looking at prior hash rate growth and using that to extrapolate future hash rate growth, because the two things that that absolutely doesn't account for that are n- essential. 16:11 Number one, it doesn't account for, um, advancements to chips. 16:15 You know, every generation of chip consumes less electricity for higher hash rate output and, um, the, the advancements are exponentially greater, so they stack, right? 16:25 They end up getting, you know, the advancements that you're getting, um, out of something like a, uh, GPU to an ASIC is huge, right? 16:34 Um, they stack from, uh, you know, mining hardware to mining hardware, uh, i-in terms of, uh, leaping from one to another. 16:41 Uh, they don't stack as well in terms of like once you get to the ASICs, you have incremental improvements, but they're still big and they add up over time, right? 16:47 So they didn't seem to factor in the efficiency improvements that we would've seen between twenty twenty-two and twenty twenty-five, or they just got them wrong. 16:54 They also didn't factor in just general demand for the ASICs. I guess maybe they thought demand would be low given where we were in the cycle. But you have to factor in that Bitcoin might rip, right? 17:03 Like we saw and hash price might recover. Or you might get some black swan thing, like the ordinals market blowing, uh, uh, or surging, right? 17:09 And then transaction fees are super juicy for like a year, and hash price is higher than we thought it would be, supporting more hash rate. Uh, just the bottom line is we used to do these at Luxor. 17:19 Um, Ben Harper and some of the finance guys lead their projection models for hash rate. 17:23 They do a really good job, and they have a, a supply and demand model that looks at every single variable you would wanna look at in terms of how much hash rate could the network support at a given time. 17:34 And in that supply and demand model were projections for how much hardware the ASIC manufacturers would be producing. 17:40 So all that being said, like, actually projecting hash rate is extremely difficult, and you have to have all these variables within a, a, a, a re-reasonable confidence interval in terms of like your error or your margin for error. 17:53 And I think that when we were doing the, uh, projections in like twenty twenty-three when we first started the projections report, we landed on somewhere in twenty twenty-four and twenty twenty-five for, uh, a zetahash. 18:03 I think our original one was twenty twenty-four, but that just goes to show you can also, you know, overshoot, going back to the Bill Gates quote. Yeah. 18:09 Because w- I thought we were gonna get there a lot, a lot more quickly than we actually did, but-Yeah, a lot going on there. 18:15 And so this is also on the back of, uh, um, whatever term you wanna call miner rip September, where [chuckles] um, uh, you know, we saw, I would say the harbinger of this particular, uh, crypto pump, which is Bitcoin mining stocks have been doing pretty well. 18:36 And that's been a little bit of a, little bit of like a... That's been almost like siloed narrative outside of, uh, like, uh, Bitcoin and crypto. 18:45 Like some of these like public mining stocks, which had not done, they'd not kept up with the broader market for quite some time. They started hitting highs in September. 18:55 Bitcoin mining stocks hit record fifty-eight billion dollar market capitalization in September. Since June, Irin is up leading the pack at six hundred and twenty-four percent. 19:05 Applied Digital up at three hundred and forty-five. Cipher up at three hundred and twenty-one. Wolf at two hundred and seventy-nine. Hut 8 at a hundred and seventy-nine. 19:14 Bitfarms at a hundred and seventy-nine, et cetera, et cetera, et cetera. I mean, every single major Bitcoin miner is up, some more than others. 19:21 And I think the biggest takeaway though is, funnily enough, this has almost nothing to do with Bitcoin mining. Yeah. 19:26 I mean, some of it is in response to Bitcoin, uh, surging, but the fact of the matter is, if you look at the leaders, Irin, Applied Digital, Cipher, Wolf, and Hut, Bitfarms, Riot, the thing all of these have in common is that they are pivoting towards AI and HPC strategies. 19:42 Um, some are taking different approaches. Like Irin is doing a neo cloud model, where they're owning GPUs outright. 19:48 Um, the others like Cipher and Wolf are building power shells infrastructure, basically massive, um, data centers for other people to park their GPUs. 19:56 But the fact of the matter is, the AI and HPC narrative is still in full swing, and a lot of the miners who put in work over the last two years to actually establish legitimate business lines for AI and HPC have been reaping the fruits of that recently. 20:09 I mean, we've seen massive deals with Wolf, uh, uh, getting a deal with Fluid Stack with like a couple billion dollars worth of income or revenue from that backstop of Google. Yeah, Google's hyperscaler arm. 20:20 And Cipher did the same thing, also a Fluid Stack deal backstopped by Google. 20:24 It seems like Hut 8, given the price action, I would not be surprised if we saw an announcement from an AI and HPC tenant or some sort of, you know, big business development there. 20:35 Um, and Bitfarms also, um, you know, moving towards, uh, building out AI and HPC services as well. 20:42 So this has been the investment thesis du jour, and it's not going away anytime soon, at least until this, uh, tech bubble, AI bubble pops. Uh, but you know, for some of these miners, this 20:54 h- has been really the only thing to get them to catch a bid because they have not had the same correlation to Bitcoin this cycle as we've seen in pri- prior cycles. 21:02 Like the, the investors and the analysts are getting much sharper in covering these equities. At least on the Bitcoin mining side, they're not just looking at cost per coin. 21:10 They're not looking at how much Bitcoin is worth at a given time. They're looking at the company's hash price. They're looking at their, the cost to produce that hash rate, all of these things, so. Okay. 21:19 So you got to do, um, your wheelhouse, which is, I would say, real businesses producing real revenues, um, in real world economies. Now it's time for me to flex my totally fake JPEG bullish story, which is ordinals. 21:36 Are they back? Yes. Bitcoin ordinals, those cute little JPEGs and, uh, the associated crazy meme coin economy surrounding this, which is surprisingly, 21:48 uh, maybe anywhere to a, from a third to half of Bitcoin's transaction activity per day, still not have a good, not had a good year. But the past week they've caught a bid finally. So here is Magic Eden. 22:02 Uh, Magic Eden is the place where, you know, the largest marketplace for people trading these assets. And look at that. 22:09 On the day, every single collection, the top ten is up double-digit percentages, with the exception of Tapper Wizards, which are six point three percent, but also it's in the higher ticket item. So I mean, 22:21 um, you know, all of these are up. They're up pretty big on the week, and they're, uh, mixed across the board on the month. But the thing is, is that there's finally some like activity and hope entering the ecosystem. 22:35 And I'll share one fun little story about this. So one fun little thing, and I know 'cause the Ordinals people listen to this show, and they wait for me to talk about Ordinals. I'm gonna talk about it. 22:45 I'm gonna, I'm gonna, I'm gonna talk about one of the funny things happening, and if you don't like these things, I'm sorry, you can cover your ears. You can't take this type of conversation. So- Get out. 22:55 Get out of here. [laughs] Yeah. [laughs] Okay, so the degens have done it again. [laughs] They have come up with this concept. They've come up with another Ponzi scheme. [laughs] Do what they, do what they do best. 23:08 Um, we have here, uh, on the screen Node Strategy, which is, um, basically a micro strategy play, a DAP, a digital asset treasury for one type of these Ordinals assets, s- specifically node bugs. 23:24 So they launched this past week. I think this kind of thing pumped the mar- uh, pumped, uh, pumped up everybody's bags. 23:31 Um, they're trading on a, uh, primarily on a, on a platform called RadFi, which does this kind of like multisig, like locking scheme. Anyway, but um, it's pretty fun [chuckles] to watch because they have a whole... 23:43 It's like literally, uh, the, the s- the, the, the group, the DAP, if you will, does generate some fees, uh, you know, that are traded through it, and it uses those fees then to buy back more of these assets. 23:55 So- So people aren't like, people aren't like inve- they're not giving them money. They're earning revenue from- Both... uh, trading fees? The answer is both. Oh. Yeah. Okay. So yeah. 24:06 You- I mean, arguably, the fact that they actually have trading fees to buy it gives them kind of more... It's kind of more interesting than just- Yeah... 24:14 you know, a pure play crypto, uh, DAP going and just buying a bunch of Bitcoin with like a convert or, you know- Yeah, I mean like-... a convert or something, right? Yeah. I, I, you know, look at the hyper liquid story. 24:25 It's a, it's a platform that produces revenues, so you know, and then they use those revenues to buy back the asset that it wants. I mean, the revenue meta, it got... That sounds like a real business, doesn't it? 24:39 [laughs] So, um. [laughs] Uh, well, where what's funny is the lon- on a long enough timeline, crypto just begins to resemble, uh, real businesses. Uh, surprise. Yeah. Most of this stuff [chuckles] is just, uh... 24:53 It's, uh, nothing new on a new platform. So- It's the same stuff, but you get to feel cool doing it. Yeah. Um, so anyway, I thought I'd share that 'cause it's a fun little, uh, glimpse into the Ordinals ecosystem. 25:05 And if the, if Ordinals come running back, y'all better be ready. 25:08 I'm gonna do some Ordinals-related podcasts on here, and we're gonna talk about again, talk about them again because Ordinals is what kicked off Bitcoin Season 2 and, uh, and, uh, so we gotta go back to our- And Charlie's dying to come home. 25:22 [chuckles] Yes. Uh, look, I can only talk about treasuries for so long. Man, get me back on chain. I wanna, I wanna transact on chain. I don't care what I'm transacting. 25:32 I just care that it's back on my, my home field, which is Bitcoin on chain. So thank you all for listening to Bitcoin Season 2. Make sure to like and subscribe. 25:43 If you are listening on Spotify, make sure to like the star and give us a review. Apple Podcasts, same thing. YouTube, like and subscribe, hit the notification button, and we will see you all next week. 25:58 [outro music]
