Michael Saylor BULLISH at Consensus 2021 | Bitcoin Mining Council, Chat with Elon, China FUD, ESG!

thank you so much aaron and hi everyone

thanks for joining us for this

timely discussion on crypto markets and

the involvement of

institutions as aaron said i'm noah

atchison managing director of research

here at coindesk and over the next 30

minutes we're going to look at the role

institutions are playing

in recent market evolution how the

market is changing

and of course some of the recent

developments over the past couple of

weeks and the past couple of days that

shed light

on where it could go from here to do

that i'm joined by two people that you

probably already know for those of you

just tuning in

i'm joined by the ceo of microstrategy

michael saylor

who arguably kicked off a wave of

corporate interest

in bitcoin reserves and who many of you

know for the educational work

he's done in bringing institutions and

corporations into our industry

and i'm also joined by michael sunshine

ceo of grayscale investments the largest

and longest-running digital asset

manager in the industry

and a sister company of coindesk thank

you both so much for being here

great to be here now normally i would be

asking the contents the events content

team why

we have two michaels on this panel as

it's going to make directing the

questions a bit more complicated

than usual and surely there should be

rules about this kind of thing but

in this case the question would be

pointless because there are

no two people better positioned to

discuss the shape and characteristics

of the institutional involvement in this

stage

of the market so i'm going to take the

cumbersome route of addressing each of

you by your full name

it'll sound oddly formal but we'll get

used to it

now i know a lot of people watching want

to hear more

about the bitcoin mining council that

you

announced yesterday michael saylor as do

i but before we dive into that

let's set up some market context let's

talk about

the market drama of the past couple of

weeks before we dive into some of the

more recent developments and then move

on to broader market issues

that institutions are interested in and

concerned about

and as if we needed a reminder that

crypto markets are never boring and

things move fast we saw some wild

swings over the past couple of weeks

that at one stage

had bitcoin down 50 from its recent high

and even just over this weekend

the price was down about 20 percent on

the day

michael sailor microstrategy has been

buying

the recent dip so we can infer your view

on whether this was or not a short-term

blip but

from what you're hearing did it have any

impact on corporate

interest in bitcoin things got pretty

heavy there for a while

yeah i think that um

bitcoin's one of those stories where if

you

you're only casually interested in it

you just look at the

price volatility and and the deeper you

look at it the more you think it's like

a generational or a decade-long trade

last week um i think there are pros and

cons

koi there's a bit more volatility and

that would scare away

weak uh weak non-committal players

but there's a ton of institutions that

were very enthusiastic about it that

that decided they wanted to buy it when

it was 30 000 around the beginning of

the year

and then they watched to their chagrin

as it doubled and they thought well it

can't double every quarter

forever it's ahead of itself and then

they stopped and they wouldn't buy

and so in circumstances like that what

you want is a dip where they get to

get in at a very good price and so

a lot of people think oh the price

traded down last week but if you

actually look at the exchange volume on

binance which is

probably the most liquid you know

greatest statistical example we have

on black thursday in march of 2020 by

that exchange traded two billion in an

awful day

the worst day of the year by most

people's rec collections

on the day when um you know and it was

around five thousand

on the day when microstrategy announced

our our purchase

uh uh august 10th that exchange traded a

billion dollars of bitcoin in the day

um i think uh that exchange has traded

up to 14 or 15 billion dollars of

bitcoin on

some days last week and traded 60

billion dollars over the course of six

days and

the bottom line bitcoins up by a factor

of four

liquidity is up by a factor of five to

eight

even ten and some institutions bought 60

billion dollars of bitcoin at a good

price

last week while someone got panicked

over what i view as fud

and they dumped it too cheap so um

you know i think you what you see is

that the the long-term players are

actually pretty happy

uh to have the opportunity to get into

this entry point

and if i was looking at it the number

one thing i'd always look at is

is the price moving on no volume or in a

lot of volume because that tells you the

institutional sentiment

that's a very good point yes and michael

sunshine the institutions that you speak

to

many have been invested in crypto for a

very long time so

this was nothing new but many are new we

saw huge institutional inflow

in q4 and q1 so it's only the first time

we've been exposed to something like

this

did it spook them i don't think that it

does

i think what we've historically seen is

when

there are these types of pullbacks uh

you typically see

investors using them as really

opportunities to either average down on

their position

um or in some instances to start a

position

you know having having been in my seat

over the last eight years

i'm still yet to find somebody who's

able to time the market

um no matter how storied or experienced

an investor you are

and i think generally the institutions

that have been allocating to the space

are those that are going to be in this

trade for the medium to long term

and so i like to think about well if

your fundamental reason for having this

allocation

hasn't changed but you know suddenly you

can buy the same asset

for you know 10 15 maybe even 20 percent

less

than you could the day before then that

for an institution is a really

compelling

opportunity um you know i think

historically

um one thing that has certainly

resonated with institutions

is really resiliency you know each time

we see some of these very material

pullbacks in price

we're seeing a pretty massive

deleveraging of the entire ecosystem

which i think is healthy and when you

think about the fact that this may at

times

represent volatility that is larger or

more pronounced than

sometimes is viewed in equities or fixed

income or other asset classes

it's almost a healthy reminder to a lot

of investors of just how early it is for

investing in the ecosystem

uh and that it is subject to these types

of price swings but

by no means do i think that this you

know discourages investment

i think more often than not we hear

investors use this opportunistically

as they think about building portfolios

that include crypto over a longer time

horizon

yeah that's a very interesting point

about the time horizon of investment it

would separate investors from traders

and as michael's saylor hinted many

focus on the price but longer-term

investors focus on a whole lot

of other metrics even more so perhaps

than the price and um michael sonnenheim

sticking with you

for a second we've been hearing louder

talk at least from what i've seen about

bitcoins energy footprints we see it

splashed across

mainstream media and gleefully retweeted

and shared on

social media is this concern about

bitcoin's environmental impact is it

shared

across institutional investors so

the institutions that we deal with um

are exceedingly well informed

not just about the fundamentals that

underpin and govern

the bitcoin protocol but also obviously

mining which is a key component of it

and so i don't think it's any secret um

that mining

is an energy intensive process and

something that is

you know very very very important to the

effective functioning of the network

now what's been interesting is that as

institutions have come into the space

and certainly esg has been a theme that

many of them have been wanting to

you know allocate towards and think

about in terms of their investment

approach

it's it's suddenly though feels like

more light is being

shined on this one area of the ecosystem

and i actually view this more than

anything as an opportunity

um you know the ecosystem is new uh

the mining ecosystem has evolved very

rapidly

as the difficulty has changed over time

as one day you could use a store-bought

computer to mine bitcoin

today it's obviously involved into a

much much different ecosystem

and a very very competitive landscape

and what we've certainly seen from rc

being plugged in uh to various miners in

various parts of the ecosystem is that

folks really are thinking about

the environmental concerns and are using

renewables

as part of their energy mix so i think

as we you know potentially

shed more light on this and spend some

more time on this to

engage with miners in the ecosystem it

really is an

opportunity for a very young asset class

in a very young ecosystem to

i think further embrace um you know

other renewable energy sources

and to make this a more material part of

the impact they have

i also like the point you make about how

much the bitcoin mining

industry has changed over the past few

years not just through energy mix but

also

geographically michael saylor what about

corporations

do you see genuine concern there about

bitcoin's environmental impact

um i i think the corporations would

would have the same thoughts that any

other

institutional investor has i think they

just want to be educated

on the subject and um and that's the key

for us

provide education and that provides a

very good segue see what i did there

and we can now talk about the bitcoin

mining council speaking of education

on on the energy footprint you you

announced on twitter

yesterday michael sader that you had

convened many of north america's largest

bitcoin miners

and elon musk to discuss the industry's

environmental footprint and what can be

done to improve

the understanding and perception of the

current status can you give us some

background on how that came together

sure well you know elon uh

is a big believer in crypto technology

as a force for freedom

and he's a big believer in bitcoin as uh

as a long-term store of value and and

he's expressed that sentiment in a

number of ways including

taking a multi-billion dollar position

in bitcoin

uh i think we all know he expressed a

concern that uh

he didn't want to see bitcoin be the

catalyst uh

to bring to life uh dirty fossil fuels

and that created a bit of a twitter stir

and uh

that caused bitcoin uh to dominate the

news cycle

all last week across the mainstream

media

and uh i think it became pretty

clear that um that we

have a the bitcoiners we have a good

story

uh but it's a very complicated story

and uh we need to find a way to uh share

our story and and

and to educate and get organized so i

i think my first thought was

there's no point in us tweeting back and

forth at each other because i don't

think 280 character

twitters are are right ways to uh to

educate the public and build

consensus so um

i reached out to elon and i uh and i

spoke with him and we had a very long

conversation and and from that uh

i asked him to if he had relationships

or had met with the bitcoin miners

and he elon has expressed right on the

record he said he thought

we would all benefit if we were able to

publish energy usage and source of

energy usage data

it turns out that bitcoin miners don't

actually

um have a good form for communicating

how they generate their energy

we don't have a stair a shared common

model for bitcoin energy usage

right now and we don't have a future

forecast

uh model that we that we commonly use

so we're allowing other journalists in

the mainstream media or just anybody

that wants to

to make up their own model um the most

famous one being the boil the oceans by

2020 model that's going to cause the

planet to overheat by two centigrade and

kill us all

but uh and that's still wrap it's still

ratcheting around right so

we have some bad models and uh i

you know i happen to have a fairly

nuanced model my view

is that energy usage is you know energy

efficiency is is um

is growing exponentially you know the

s19 miners are

increasing by a factor of five in energy

efficiency versus the s9s and

and between the halvings and the shift

to transaction fees and the upgrade of

the miners

we're going to see energy efficiency

increase

exponentially and energy usage decrease

recently

i don't think there's any models or any

understanding of how that's working it's

a fairly complicated subject i mean it

would take me about half an hour

on your on your uh podcast here i don't

think we could talk about it

but what i uh what i can say is i had

some detailed discussions and

and i asked elon if he had relations

with the minors and he said he'd like to

meet them

so uh i reached out to the minors and i

asked them if they'd like to meet elon

musk and they said yes they would

and so we set up the meeting because um

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he wanted to understand how they're

mining and what their plans and futures

are

and they wanted to understand his

concerns and we wanted

to understand how we could be the good

guys in the entire esg debate because i

think the bitcoin

is they are the good people we are

actually driving sustainability it is a

it is a great way to recycle wasted

energy and we have a great energy story

and so i i think that the group came

together

to uh to get elon's uh thoughts

and for us to brainstorm on what we can

do

in order to communicate constructively

to the entire industry and avoid

reinventing the wheel right because

if there's 200 miners and each one of

them has to develop their own model of

the future of bitcoin mining for the

next 20 years and figure out

what to say and who to say it to and you

know it gets pretty complicated and none

of them have a

a voice or a platform to get their

message

through so i thought it was a very

constructive meeting

uh i think we do have a great story

i think we're all committed um to uh to

taking that message out to institutional

investors and and to refining it and

i think elon's first order ask was was

hey can we come up with a way to to

uh publish or create transparency

for bitcoin mining energy usage

i saw something on twitter today that

suggested that bitcoin

is is 2 or 3x as as

sustainable as other energy

users that's the kind of story we need

to get out but we need to legitimize it

by having

really good data so i think i think the

first step is

is let's come up with a a protocol for

us to publish energy information and

then a way that we can share it with the

world

and then work together uh to make sure

that we pursue

sustainable energy goals because

that does because it's true a

b because it will actually ensure that

the mainstream news

cycles are positive and not negative and

that will give institutional investors

comfort as they enter the space

and not cause them to pause yeah

michael i i wholeheartedly agree with

you noel if i could just jump in for a

sec i think

you know the past few weeks when we've

had this kind of renewed focus

on esg concerns around bitcoin or

digital currency mining

i think for a lot of us in the space and

a lot of the conversations we've been

having with investors

have really caused us to kind of go back

to square one on bitcoin and the idea of

decentralized currencies

these were really brought about to

create a better

world a more inclusive world a more

sustainable world and so i think

you know having you know some catalyst

as a reason

to have a renewed focus on the

sustainability component

is again an opportunity for the

ecosystem not necessarily

a flaw so we're not hearing from

investors that this is you know somehow

become a deterrent

but rather yet again a reminder that if

you know in the last 10 or 12 years

that now that bitcoin has you know moved

more into the mainstream and these are

now some of the

kind of growing pains or kind of the

next steps in its evolution for it to

tackle

well then that presents a really

exciting way to michael's point for the

industry to work together to try to

solve some of those

and regaining control of the narrative

with actual data right now we've been

hearing similar stories but they've been

very

largely anecdotal what is interesting to

reflect on is would we even be having

this conversation

a few years ago is in other words is it

the institutional involvement

that is bringing some mainstream

attention to the environmental concerns

especially given some of the pressing

issues

that investment funds around the world

have to have to deal with

um michael saylor many have set off

sirens claiming that this is

industry centralization it could lead to

minor collusion perhaps network

censorship

what's your response to that everybody

in that meeting

including elon are passionate believers

in decentralization the only reason we

had the meeting

is because we wanted to ensure the

success

of a decentralized cryptocurrency and

the

source of the decentralization is energy

usage

and the existential threat to bitcoin

is concerns over the sustainability of

the energy usage so

to the extent that we want to defend

bitcoin

we need to manage any concerns

especially from uninformed

parties uh concerning energy usage we

need to make sure the people that are

hostile

to bitcoin and hostile to the crypto

industry

aren't defining uh those narratives and

defining those models and defining those

metrics

in the absence of of any good

information or any response

on our part they will uh define those

models

i think there was this concern there's

some concern so it's a

secret meeting it was a secret meeting i

wouldn't have told

millions of people the next day that it

was a secret meeting trust me

you know we told everybody in the world

that we had a meeting

and if everybody wants to know what

happened in the meeting what happened in

the meeting

is is elon met the miners

the miners talked about you know their

approach toward energy

and their commitment to sustainability

we asked elon for his advice about

about how we we might actually manage

concerns in the mainstream

we had a detailed conversation about it

we uh we talked about how we might be

able to

to surface better data and uh

and and it was very constructive

and uh then we agreed uh you know to do

our best to continue to

work toward um sustainability

and similar goals

michael sunshine you've probably seen

that many of the

you know bitcoin i say advocates

original ogs if you like bitcoin

advocates are very much against this

idea because of the threat of

centralization the bitcoin community has

lived through

a few scares like this in the past which

turned out not to be

a big deal what do you think it would

take to convince the community

that centralization is not a risk here i

think we just need

time um more than anything noel um

i think time and again we continue to

see the ecosystem

bitcoin or otherwise continue to get

challenged and

you know each time there's a challenge

whether it's you know things around

block size

transactional throughput esg concerns

um we've been through challenges around

the use cases for bitcoin

is it used for nefarious activity is it

not how much transparency is there

we've seen so many iterations of this

and i think each time and one of the

things that's so rewarding about being

part of this community

is that each time it does get challenged

it comes out of those challenges

uh stronger than ever um so i think

you know this is some somewhat of i i

believe to be a short-lived

um focus on this aspect of the ecosystem

and again

given the kind of ingenuity and the

human capital that's involved with

bitcoin today

um i have the utmost confidence that you

know solutions are on the

or on the horizon michael saylor what

are the next steps for the council

i think uh we're going to continue uh to

work on this

this energy issue to see if we can come

up with some way to

uh to report uh bitcoin's energy usage

and keep track of

of our progress towards sustainability

and benchmark us versus

other industries so that we can come up

with the right way to communicate this

to the rest of the world to the

institutional community and the

mainstream

media it's a it's a completely

uh energy focused discussion and

primarily just

completely focused upon how we create

transparency

toward the use of energy and also

i think build confidence in the rest of

the world that

that bitcoin is not getting

dirtier and less energy efficient

bitcoin and

cleaner and more energy efficient and in

fact

it is the most efficient use of energy

in the world right now as i've said

before i think it's

it's the most efficient technology for

converting energy into prosperity

as an analyst i'm very much looking

forward to getting hold of a data-based

narrative

and talking more about facts rather than

an assumption so so thank you

for that michael sunshine let's zoom out

in the few minutes that we have left

the description for this chat says that

the institutional herd narrative

is finally playing out as predicted is

it

you've been in this market longer than

most is this the institutional market

you expected

i think we're definitely moving into the

market that that we all hoped would one

day come i would say

from our seat we're encouraged by how

much institutional participation

um has been involved in this ecosystem

and continues to join

um that's happening both i think in the

you know money management space so

pensions endowments rias hedge funds

but then also this whole new segment of

corporates like michael michael and

microstrategy and what he and other you

know really

notable and and um uh you know very

experienced investors are doing as they

think about allocating

to bitcoin i think what feels different

to us this time around is the dynamics

that play in the market

so earlier we touched on liquidity but i

also want to talk about some of the

other things that have come along

the trading tools the tax lot reporting

the development of indices

the development of order management

systems i think the

absence of these tools is what has

historically

prevented institutional adoption and

participation

and the fact that they're now part of

this ecosystem

has certainly made it much more

approachable and much more

attainable for traditional investors and

institutional investors to get involved

where i think we're headed from here

though is the fact that

even though we have this great ecosystem

of tools being built

it still hasn't been bridged into the

traditional financial system um

some who are kind of crypto enthusiasts

and ogs may argue

um that that's that's a good thing um we

should keep crypto out of the

traditional financial system and others

argue that you know the next billion or

multi-billion people that will access

crypto will be because

those two systems get bridged and so a

lot of the things that we're focused on

are looking at how these two ecosystems

are going to be bridged

and you know what that's going to do to

allow more users

into the crypto ecosystem and how

they're going to access crypto

as part of their investment portfolio

michael saylor what has most surprised

you

about the changes what's the biggest

change in the market in your opinion

since microstrategy bought

its first bitcoin you know what

surprised me

is that is that we've had a non-stop

avalanche of good news

david rubinstein who's uh jerome paul's

famous boss

endorses crypto larry summers the

secretary of the treasury

endorses crypto goldman sachs

declares you know they endorse bitcoin

right they're saying that

that this is a this is a new asset class

uh

ray dalio says he'd rather own bitcoin

than bonds

right uh coinbase comes public uh

an avalanche of really good news and

then

uh i see the volatility in the market

all based upon

fud and the fud is first it was the

chinese are mining too much bitcoin and

then the fud will

sell bitcoin and the second fund was the

chinese are going to stop mining bitcoin

sell bitcoin

and then the fund was well you can't buy

bitcoin in china sell bitcoin and then

the fund was

oh the chinese reiterated you can't buy

bitcoin in china

sell bitcoin and then the fud was oh irs

says you got to pay your taxes

sell bitcoin so and and that's the news

cycle

right so i i feel like like

uh everything's working out great i mean

if you'd asked me

in august are you gonna do you expect to

get the legitimization of bitcoin like

this

i wouldn't have in my wildest dreams

expected so much good news to come so

i think it's it's going awesome just the

market is volatile

that is such a good upbeat note to end

this session on thank you so much

michael saylor

michael sunshine given those changes

we've seen just over the past few months

it is going to be certainly interesting

to see

what will will have changed what will

have changed between now and

consensus 2022 apart from hopefully the

fact that we might be able to be

together

in person thank you both so much for

your time today thank you all for

watching us

and i'm going to hand it back to aaron

now thanks

so michael sailor just said that the

correction of bitcoin

is based on pure fud uh that was a great

way to close that

uh something really interesting that he

said um was that he

organized this meeting between elon musk

and the miners

uh and that he asked the miners if they

were wanted to go

and talk to elon musk about uh settling

the debate around

energy consumption and how green uh

bitcoin's mining

is um and they all apparently were

interested in talking to each other

and he said that everybody in that

meeting

is a passionate fan of decentralization

and of the value of bitcoin in the world

that is great to hear

they spoke about how they can make the

energy

usage in bitcoin mining more transparent

uh he highlighted that everything isn't

transparent at the moment

uh but it does need to be obviously we

live in a day where esg

is becoming more and more important for

investors so highlighting all of those

metrics in

real transparent accessible figures that

you can look at online before you make

your purchasing decision

is important what he also said is that

bitcoin is getting cleaner every day he

said

he predicted that uh bitcoin is going to

exponentially become

more and more efficient as new miners

are produced as the new

versions of amp miners and all of the

other miners that are used around the

world are produced

and energy usage is equally at the same

time going to come

exponentially down so when you mix those

two together

uh he believes that everything happening

right now is pure fud

with the price correction uh that it

should go back up

uh obviously we all know that it's all

passionate fud

too many people are on twitter basically

uh everyone is following the same person

that has around 2 million followers

and then he tweets something that he

shouldn't be tweeting

probably at the wrong time of the day

and then the market corrects he tweets

the opposite side of the pitcher and

then the market goes up so

great to see michael saylor talking

there i hope you guys enjoyed that as

much as i did

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