Bitcoin Mining: Adapt or Die with Nick Hansen & Matthew Williams - WBD723

Today we have two representatives of the Bitcoin mining firm
Luxor Technologies: Nick Hansen, CEO, and Matthew Williams, Head
of Derivatives. In this interview, we discuss derivative trading,
the potential impact of the BlackRock ETF on the market, the
challenges Bitcoin miners face, the political and economic
situation in Argentina, and the importance of hedging in business
operations.


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Bitcoin’s price has been relatively stable for well over a year.
Whilst prices have recovered from the cycle lows seen in November
2022, the rapid price swings, which have been a feature of the
market since its launch, have subsided. Nevertheless, a series of
events are aligning that raise the prospect of a renewed period
of volatility in the near future: the approval of a spot ETF, the
Bitcoin halving, and further macro shocks.


The issue for capital investment in the Bitcoin mining space is
that such volatility distorts and stresses normal business
management practices. There have been numerous mining companies
that have suffered existential crises because they have
over-extended at the wrong time, or, they have had ineffective
hedging strategies. Luxor aims to help improve the cost of
capital for Bitcoin miners through the introduction of new
derivative products.


Luxor’s strategy is predicated on hashrate being treated as an
asset class; miners are able to sell their hashrate forward,
guaranteeing a return. The contracts are determined by an agreed
hashprice, which is a function of various variables: the block
subsidy, transaction fees, network difficulty, and bitcoin price.
These contracts are then tradable as derivatives, which enables
investors to gain exposure to Bitcoin mining without needing to
be physically involved.


Luxor is also working on additional financial products, including
what will be a controversial yield instrument. There is still
significant hesitancy in the community around such markets, and
it will take time to build liquidity. Perhaps a new approach can
renew demand for lending. And, if anyone can pull this off, who
better than a diversified company that weathered a brutal bear
market that aggressively showed who was naked when the tide went
out?


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Show notes:
https://www.whatbitcoindid.com/podcast/bitcoin-mining-adapt-or-die


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Iris Energy - Bitcoin Mining. Done Sustainably
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