Bitcoin's Quantum Problem? It Doesn't Exist Yet! with Frank Holmes

that's exactly what bitco delivers. With over a decade of experience and fifty five hundred plus institutional clients across one hundred plus countries, bitco provides a full suite of services including qualified custody, trading, staking, financing, and stable cooin infrastructure, all in one platform. Let's break it down, want to

launch crypto services fast? Bitgo's crypto as a service lets banks, FinTechs and platforms go live in as little as a couple of months without dealing with complex licensing or infrastructure. If you're looking to launch a stable coin, bidgo offers a complete stable coin as a service platform, from reserves and smart contracts to compliance, built to align with the new US regulatory framework. That is the genius at want

to earn rewards on your crypto. Bitco runs one of the largest institutional staking platforms, with tens of billions staked across fifty plus networks, all while your assets stays securely in qualified custody. Need deep liquidity and execution, Their trading platform aggregates liquidity across thirty plus venues, giving you better pricing and the ability to trade directly from custody. No

pre funding required for approved clients. And if you need capital, bitgo offers crypto backed financing so you can unlock liquidity without selling your assets. So here's the bottom line. Bitco is one of the first federally chartered digital asset infrastructure companies, offering regulated, insured city and a platform build for institutions

but accessible to for thinking players across the space. So whether you're scaling a fintech, managing a fund, or building the future of finance, bitco gives you all the tools that you need to do this securely, compliantly, and at scale. So learn more at bitgo dot com and see why the biggest players in crypto trust Bitgo. Hey, folks, welcome into the Thinking Crypto podcast. I'm your host Tony Edward,

and join me. Today is Frank Holmes, who is the co founder of High Blockchain Technologies, the CEO and CIO of Macro Global Investors. This is not Frank's first time on the pod. Frank, it's great to see you again.

So do you expect this really f rally to continue, Frank.

that the bottom is here. And I think a big part is the growth of ETFs in the past year, so rebuffers that type of decline that all of a sudden people become bottom fissures, they come out, they look for bottoms they think it's bottom. Whereas before we had a very small bitcoin ecosystem and now has grown dramatically.

Just recently they hit that one million number mark, but folks have been mining since then, including high and we have another one hundred years, which is you know, when you try to think about it, it's kind of crazy, but that's how the algorithm is programmed, So do you believe there's going to be more competition to mine bitcoin from nation states and even energy companies and things like that.

more challenging even taking out the central core. So you can see that in war, and you can see that the importance of the bitcoin network is so global, so decentralized that it's like watching those Star Star Trek movies where the force shield gets hit and it bends in and it comes right back out. It bends in, it comes right back out. So I think that that's what

we're living with in the bitcoin ecosystem. And I think that all these data centers that are focused as Tier one data centers in the ecosystem, they will want to become very important for moving capital around the world.

twenty eight. Is it too really to answer this question, but I'm curious how high is preparing for that and as the difficulty increases, and.

think I've learned this in South Texas fracking. So you can hit a well and you get one thousand barrels a day, but a year later it's only one hundred. So you have to maintain that consumes drilling to maintain that thousand barrels a day and to maintain your efficiency. Where what we witness was really incredible that the ACY chips were originally almost like three hundred jewels per second consumption of electricity and now they're pushing ten and eleven.

So you've seen Moore's law basically show up in the acy chips and so will they get down to five or six jewels per second. So what we've been doing is buying some of the new ones that have very low consumption of electricity. And during this past quarter it

has been really difficult. If you'd notice that most of the bitcoin miners have stopped giving it their monthly production because we had a freeze in North America, we had a heat wave in the southern hemisphere, so we had all these sort of outages, and you also had the difficulty rising. And so what we found we had to do was retool our firmware so that we could become or energy efficient because hot does function over nine time zones, five languages, and three continents. So we still drive every

day to meet are we being efficient? Every morning we meet around the world to make sure what machines are plugged and plugged out and when is the delivery of one hundred new name machines coming in.

the content. Thank you so much, And are you leveraging AI in any way during the mining process?

Etherorum went away and we started going into AI. So in fact we're the first to really go into AI. And now we have a run rate pushing about three million a month and we see that that will scale another five hundred five fold this year. On the transfer and the other big learning curve has been a tier one data center cash about a million dollars of megawat

with your ACIC machines in them. When you go to Tier three, which Video likes to call an AI factory, which I totally agree with this concept, you're talking about thirty three million dollars per megawat. It's thirty three times more expensive. So some of the companies say they're jumping into it and they're partnering with hyperscalers to go use a repurpose their their centers. I think that's great. What I'm going to share with you is that it's much

more difficult to build those Tier three data centers. Just the air conditioning is forty percent of the electricity, and there's a big backlog of fifty weeks to get a lot of the HVAC equipment. So it's not so fast like getting an adminery showing up at the door, and it takes us six hours to unwrap the plastic cug it in and as mining, when we get a chip that's GPU chip, it takes us six weeks to get

it working. It's so sensitive. It's like, like I said earlier, a Lamborghini or Bugatti going over a bumpy road and you need a wheel alignment right away. The GPU chips are much more air conditioning consumed because you're built of

brain and the costs for overall running them. So we know what we're doing in that end of it, and we're really excited about what we've been able to show that Tier win data centers transform into Tier three data centers faster than starting from scratch for a Tier three

data center. And that's what we've seen in America, and we've seen this in Canada, and we've seen in Abilene, Texas where they were sourcing classic bitcoin minors, sourcing surplus electricity, can some power from solar, from wind and flare gas. Now it's a five hundred billion dollars spend for chat GPT because they secure the energy and the land. So if you're in the data center business and you're in the AI factory building, you have to go in source electricity,

then the land. And who did it first? Bitcoin miners. So bookliners are all of a sudden going through a new generational leap of going into the AI infrastructure buildout, in particular these concept of AI factories. The reason why I say that is that most data centers report it to the CFO, and the CFO always wants to drive down costs. Today you're seeing that the AI factors report the CEO, who wants to use it to drive revenue and to drive cash flow. So the mindset is totally different.

And so that's what HIVES basically has been. This twin engines to monetize the same megawatch through different cycles. A six produce institutional great horsepower. And that's the other part we found is that we don't have an ATM machine and a data center spinning out little gold bitcoins. It's just like, I can't believe sometimes these government agencies think this. We sell hashing power to Foundry, which is SOCKS one and two compliant in America, and they then pay us

in uncirculated or virgin bitcoin. When it comes to AI, we sell our computational power to users that run their big language, large language models and they pay us in US dollars. There's really no that none of that data or bitcoin is in our data center or in our wallet near our facility. It's always done in the cyber world.

of pioneers in having this dual model if you want to call that right, the bitcoin mining operation side of the business and now AI data SAT center support a type of side of the business. Is the model moving forward, you know, as AI is becoming more prominent, obviously is part of our economy and so forth.

nation by nation. So when you look at the NATO spend in the past few years, and you take a look at America that when they went in under Royal Reagan to go after Noriega in Panama, twenty three American soldiers were killed going after Maduro, not one. Why is that, Well, it's about AI, and it's about the synchronization of AI with a satellite, with an aircraft carrier, with an F fifteen,

with a helicopter, and with special forces and soldiers. I was reading that they were able to find that one of the pilots that was lost in Iran last week they can detect a heartbeat forty miles away. That's AI and so we just have to recognize that it's going to be a game changer for MRI for looking for cancer. It's going to help us lived longer how they analyzed blood tests. In addition to national security issues at concerns,

it's really significant game changer. So I feel excited that we're helping humanity when we think of what we're building out and transforming bitcoin data centers, not all of them, but several of our data centers into sovereign data centers. Of particular in Canada on the border of Maine and Brunswick, it's seventy megawatts will become fifty megawatts of high performance compute. And then in Toronto we have other assets which work

in the transformation. And then northern Sweden we're going through another transformation of a bitcoin mining facility to go into high performance compute.

I think some of you alluded to. Just recently. We're high reaches at AI coll milestone in Paraguay and the expansion of the data center footprint in British Columbia, AMC Robots and Hive Announcer collaboration to advanced EI driven robotics compute infrastructure. Do you guys are doing a lot?

renting that. It's really quite significant. So I'm really thrilled that high business. I mentioned earlier a dual engine digital infrastructure platform which is converting low cost clean power into two institutional products r GIN bitcoin from sok to one and two US audited pool and then contracting with our GPU chips for our compute how are sold in dollars and multi year terms. Sometimes people will rent for a week from us and other times they can rent for

a year. Are very excited. And what we partner with in Canada in particular is Bell Canada, which is the largest telecom and they've done an incredible one eighty pivot into these this concept of AI factories from having a data center expense so now generating revenue. And so we're a their strategic partner in Canada in this conversion and we're using some of their data centers as fast as they're up. We're putting in our GPW chips to get a running and generate compute.

computing is a threat to bigwoin bitcoin mining and potentially to the AI side of the business as well. Is this simply a narrative? You know, maybe short sellers are pushing this narrative because they you know, they want prices they go down, of course. Or is there a little bit of a threat and companies like yours, like Huys will eventually upgrade the equipment to have quantum resistant technology and things like that.

to a biggion dollars a month in revenue. So it's it's a big super cycle. And I think that quantum will come along. I think it's very very premature. It's extremely expensive to do what it's going to do. But I think what if you think about VideA in particular, and Vidia was a gaming company. It made ships for gamers, and their real inflection point was two thousand and ten when they started focusing on taking those GPU chips for AI. And so now where are we today. We're twenty twenty six,

so we're talking about sixteen years later. So when we talk about quantum, it's like it's going to be tomorrow. Well, it's just not true. It's a long way off. And how things will evolve. How to show far shown has been able to go through two havings, Pivot, have the first AI platform where we're generating high barger revue ourselves and now we're scaling that business. Like last year we scaled our bitcoin four hundred percent of revenue and cash flow,

and now we're going to scale the HPC business. We're in a nice position for growth. Yeah.

what he did generated for investors. So I think that that the evolution for everyone to grasp us the fact that we got open chat a few years back, and that was the wake up call to wow, this is quite incredible. And I use all four of them. I use Perplexity, I use rock, I use clode UH and I use shot GPT and they're all different. They all

give you different information and nuances. And the biggest thing I shoul share with the listeners you really have to dig down with the quality of your prompt, the depth and breadth of your plant. And I sometimes find myself writing an essay of two hundred and fifty words in a prompt so that I can get great data coming

out of it. And then I was reading that a person that created a claw, which was really highlighted by Jensen at his big conference a couple of weeks back, was a basically self taught coder from Vienna, and he changes the whole world that you don't have to know how to code these five languages. You have to know how to write a language that is English Spanish. Usually got to be able to type in a great prompt and it will then turn around and start in that

language you want. If you want it in Python, it will all of a sudden create a whole compliance system, the whole sales and marketing system for you in Python. But before you had to go hire a three hundred thousand dollars Python coder. Now you and I can do it. That the game changer.

to get crypto legislation passed. It's being held up a bit. You know, the banks are fighting back on stable coin yield, but it seems like we're going to get something potentially this year. What impact that you think this has on the adoption of bitcoin and the growth of the bitcoin mining industry that you know, we have the kind of the guardrails in place, and not necessarily a bigcoin needs much of that, but rather to allow more capital innovation to have.

There's this big battle. And what you've seen now is that Chinese have invested are loaned seventy five percent of the United Nations countries. There's one hundred and ninety three countries in the United Nations. They have invested in one hundred and fifty of them. So their tentacles are into don't trade in dollars. So all comes to this incredible company called Teather that shows you that people in emerging markets they want to own US dollars. And it's a

stable coin system. No America is to own it, No Europeans own it, but it grows to a population of about four hundred million wallets, it trades that it's the most profitable group of software coders you can think of. I mean that we're talking thirteen bigion dollars of profits for the one hundred and seventy five employees is really

quite amazing. And what I think Washington is looking to try to do is to embrace this technology, to embrace the stable coin because they want the rest of the world to own US dollars because it helps fund all the deficits and it helps fund liquidity around the world, and so we are going with some of the big money center banks trying to stop this because they're worried about money market funds would leave the banks and then go to go to this stable coin paying rewards or

a coupon, and that's your battle that's going to take place. But I think the macro dynamic is probably more significant of pushing back the banks of saying you know what, we're going to pit because strangely enough, the Chinese came out with their stable coin and their PEG rewards. They're doing everything to undermine the global network of trading in US dollars. And so that is the macro thesis where Teather shows it works. They also have a very successful

gold stable coin. It's really profound how much as grown and significance. Then, so I think the US government wants to have their stable coin and to be able to pay those title rewards, and that means that US dollar is able to continue to be the dominant keep rates lower. Some people believe that masks inflation. If we go to

the basket. Inflation came out this past week. If you looked at the basket in nineteen eighty, some economists are saying inflation is nine percent, it's not three point sapat, so you have a negative real rate of return. So I think that this debate goes back and forth, and goal bumps like to jump on and bitcoin fanatics like to go jump on the same part because they really

don't like the government deficit. But what's different is that the US dollar is global and bitcoin is global, and as we get more tethers or US comes with their own and more stable coins with US dollars, then it becomes the centralized like bitcoin, and it creates us that either you buy this stable coin with US dollars or better liquidity and stability. And if you want to move other assets that you want to have the ultimate of

scarcity is bitcoin, then you go on bitcoin. So bitcoin will become wealth preservation like goal is, and trade will be come stable coins. And I think we're witnessing is coming back. Is the big money center banks want to slow it down so they can run as fast as they can to get their own stable coins out there.

level of a strategic bigcoin reserve. We're still ironing out a few details, and some other countries across the globe have also started doing this.

I think that that will be the first step, because what often you know, they go confiscate cars and these things where they arrest are Narco and they took away all of his toys and they have a big auction and the real estate and Texas they're going to have a big auction. Well, I think that you don't have to worry about the auction to get those dollars. You just turn around and convert those stable coins from one controlled entity into the government's stockpile and they start to

collect it that way. I think that that will be a journey that will be easily adopted by countries. Then you will take a look at it as being like goal.

And bitcoin is a critical spoke in the fintech ecosystem and it's recognized as stable coins is another spoke in that wheel. And when we talk to Canadian banks, oh, we would like to do your data center business, but you'll have to go to New York City because that's where fintech analysts are, that's where the fintech conferences are.

And in Sweden they go after their biggest unicorn as a fintech company with all these incredible overreaching that they're not doing their aml KYC correct, which is just nonsense because it's all automated, it's all with AI and so it's just the banks in those countries are oligopoly. So Canada has five banks and they blocked out they controlled ninety four percent of all savings and investing, so they basically block out adoption, innovation, and the same thing happens

in countries in Europe. It's predominantly we always think of America, it's it's banking. No, it's the beer business. The beer business in America is an oligopoly. There's only a few real brewers. You know, you take a look at how much they control all the network. The banking in most other countries is an oligopoly, and there's so there's this protectionism, and I think with America it's not. I think we have.

When I first moved here thirty five years ago, there was like fourteen thousand banks, and now they're down to seven thousand. But still there's many state charters and many federal charters. So it's a it's more decentralized, dynamic ecosystem in America, and so I think it will come through and America will show that leadership with other countries over the next six to eight years. Yeah.

these other countries. So we are trying to do as much as possible in education and Paraguay, and we started with kids schools, so every kid's school within one kilometer is getting new air condition because it's very hot there, and they're getting new lighting, new chalkboards, new bathrooms, everything new and starlink. We're bringing in starlink for the for the principals and teachers so that they have Wi Fi

in those schools. Wherever they're here are our facilities. So we're doing everything to try to instill that American dream and the same thing. You know, you go to northern Sweden, the big thing is hockey. Everything is hockey. It's interesting, but still the idea that you could be another Steve Jobs, it's not totally there. They're going to relate to, well, maybe I could be Spotify or maybe I could be a gamer, but that idea of inspiring that is something

that we feel pretty good about what Hive does. Wherever we put a data center.