The Blockspace Pod: The Last Bitcoin Mining Bull Market Ever w/ Liang Wang

0:00Is there going to be another board market for Bitcoin? Absolutely yes. Is there going to be a board market for Bitcoin mining in this industry? I don't know the answer to that question because it is not the AHPC that's taking away the attention. It is the economics of mining itself that is going worse by time. It's getting increasingly difficult for new miners to make money from this industry. It is not like five years ago when if you had access to a miner you would make a lot of money. Right now it is very challenging. Bitcoin has dropped to 65, 70,000 and the hash rate hasn't reduced that much. People are still keeping their hash rate online because first they need revenue. Even though they are not making money, as a company they might need revenue to keep their jobs. And secondly, it has been used as a balancer for the grid. With increasingly higher usage from AHPC and we know AHPC is 24-7, you can't shut them down.

1:05So they need Bitcoin to take the peak so they can grow the grid and grow the power ecosystem. But we don't think the monetary benefits will be a key driver after 20-28. Welcome back to the BlockSpace podcast brought to you by CleanSpark. Public Bitcoin miners are rushing to the exit to convert their existing Bitcoin mines to AI workloads except for the company that today's guest works for. And that is Canaan Creative. Canaan is a publicly listed Bitcoin miner in ASIC manufacturer, one of the third largest in the ASIC manufacturing business. They also have a sizable self mining arm. And as all of these other Bitcoin miners are looking towards AI as the next big thing, Canaan is doubling down on Bitcoin mining. The Bitcoin miner recently purchased 3JVs from Cypher Mining. And this comes fresh off the heels of an oil and gas Bitcoin mining deal in October of last year. Today's guest is Canaan VP Lee Yang Wang. And he joins us to discuss the Cypher Mining acquisition and the Bitcoin miners 2025 results.

2:09Plus, what Canaan's game plan is now that one of their largest cohorts of ASIC purchasers in public Bitcoin miners are pivoting to AI. You're listening to the block space pod and we'll be right back. Hey, Charlie here. Guess what? We just announced our next Bitcoin technical conference up next. That's right, y'all. Up next is back for 2026. We're running it back after a successful event at Strategies HQ in Tyson's Virginia last year. And this year we are bringing it to the big Apple at the iconic time center in Midtown Manhattan. We're hosting the big names and projects that you recognize like Robin Linus of BitVM. Nick Jonas of Blockstream and Tuan Puan So of Chaincode Labs and Kale of BitChat will also be present. And this isn't just for the devs. We have institutions talking with the developers. That's what Up next is all about. We have Robert Mitchnik, head of digital assets for BlackRock in the building.

3:10We've got folks from mining pools, investor funds, Bitcoin startups, and other groups. With a ticket, of course, you'll get access to all the high signal programming and networking you could want. You'll also get coffee, catered lunch, and access to the after party at PubKey. If you want to go VIP, you'll also get access to the speaker dinner, following the event, and an investor brunch on Friday. Tickets are capped at 300. And early bird tickets are already sold out. If you want to save yourself a spot, go to opnext.dev. That is opnext.dev. Use code podcast to save 20% off a GA ticket to the event. Ticket prices go up every few weeks, so don't wait y'all lock in that ticket today. We'll see you April 16th at the time center in New York City. Leo Wang, welcome to the mining pod, sir. How you doing? Doing great. How are you, Client? Doing great. You know, as spring fevers in the air, starting to warm up around here, so getting ready for planting season to frolic in the flower field, so to speak.

4:12And it seems like everything's turning a corner of these days, including the Bitcoin mining industry, and I really wanted to have you on, because it seems like Canaan has some interesting developments going on. At a time when a lot of Bitcoin miners are leaning away from Bitcoin mining, y'all are leaning into it, and specifically with this acquisition from cipher mining of their joint venture stake in three mining sites in Texas. Can you walk us through the business case for this acquisition, and why can't I decided to dive in here? Thank you, Colin, that's a great question. As everybody says, I don't know if you have to remember the saying, bear markets are for believers to start building. So I guess expansion in sell mining is also part of that strategy from us. So we've been through four different bear markets. This is the first time for us to face a bear market. And there's no, every bear market is different, but there's no, there's no difference in our belief in Bitcoin decentralization.

5:15The company started mining just a couple of years ago, about before, which we have been long been one of the most predominant providers of ASIC chips to the market. And the reason we did that was because we believe in decentralization. We will try to empower the community and let more people understand what Bitcoin money is and how to profit from it. So bearing that in mind, for a very, very long time, when we design our miners, we always wanted to focus on green energy. We want to focus on the usage of these miners to help the grid to balance their power surges. As a matter of fact, when Elkot took us to our speech, they appreased us for our machines because compared to some of our competitors, machines operate much more stable with great durability. And when they turn them on, they don't give you all these damaging surges to the grid as some of our competitors machines do. That being said, a rule of thumb for our to look at all these mining operations

6:20is the cost of power, right? So the three mining sites where Cypher owns 49% of the equity interest that we acquired is actually very promising because they had first, Elbows has a off the grid, 100% wind of the grid behind the meter for practice, but it also has a connection to the grid. So if you run power at a very cheap below 2 cents level when the grid power is higher, or you could send it and resell it back to the grid, the other two are or connected grid, but at a very, very favorable price, I will, I will call it, you know, it's variable, but over the years, we saw the track record of that side, those two sides, the parent sheep size are running below 3 cents. I think over all these, you know, what a wild, most competitive power rates that you can get. Especially in Texas where regulatory tend to be very minimal,

7:21you don't, you know, have to deal with all these regulatory burden that you might find in some of the other jurisdictions, which is very, you know, propusness. Also, I would, you know, kind of give you a little color about why we're doing this, because Kenya as a whole is focusing, expand our energy structure, and also our strategy in future, possibly AHPC, and Kenya has been a hardware provider. You know, the start in North American energy was about two years ago, when we started to house our machines with our joint mining partners, through which structure we were able to help them optimize their operations from a hardware and software perspective, but we don't get our hands down to all these daily operations on the ground. Through acquiring the ABC interest, we are going to expand our team and have a firsthand experience in operating them

8:24at a very interesting energy landscape in the West Texas areas. And this fits in our next, next target, which is to own our own energy and infrastructure assets, which we believe will be a great fit for our current assets portfolio. And we think with that experience and that team interaction, we'll be well placed to expand into Texas and other states in more direct access to energy and infrastructure. Well, moving towards that asset, heavy strategy, involve more on-site minds at the source of the energy. I mean, we have, y'all have this, you know, this acquisition from Cypher, it's on a wind farm. There was also the news coming out of the pilot that y'all are producing or that you're starting with an oil and gas company in Alberta. I believe that news hit in October. Is that part of the strategy? Do you not just want to own the facilities, but also be as close to the energy source as possible?

9:26That is a great question. I do think that there is a market, but to us, because we are more of a pioneer in technology, we wanted to be the first across the industry to help people tape into all these resources they they weren't able to tape into with existing technology. We help them customize the system and both the software and hardware so they can dynamically fit into the need of the grid or backup the meter power sources. In the past, Bitcoin miners have always been looking for energy sources that are cheap, that are flexible, and that are away from population and from the other usage, they didn't get competition from the regular traditional manufacturing or residential uses. But that has been getting really hard, because, you know, population, you know, the AHBC, booming, all these manufacturing back and forth and the declobalization, which give people a lot of reasons

10:30to get backup on energy and resources. So I do think a lot of miners have realized that in some of the jurisdictions, especially outside of North American regions, you kind of get into trouble with local either government or community, where they request increasing reward from the miners, from a cut, you know, they want to cut from your operations. So that's the reason why we focus on North America regions, including Canada and United States. And also in Canada, we did two pilot programs, one with a greenhouse operator, which we use miners to help them heat up hot water and use a hot water to circulate across the greenhouse produce vegetables. This is a case of heat reuse. The other pilot was with the local operator, which has access to the so-called, you know, well, well, well, had stranded gas,

11:32which used to be just burned and wasted. But now they are able to use it to my Bitcoin and turn that into some economic benefits. I think these are ways into why we're in this business from day one, right? Our funding team were trying to first educate people about Bitcoin money and second use technology to make the world a better place and a more efficient place. So over the years, when we design our technology, we always try to keep that in mind that everything we do here is to help the overall ecosystem and help our customer doing the right thing. So through the years, we never try to be the largest miner or try to make the most money, but we try to be a very responsible player and enable people to mind more economically and more efficiently.

12:33So I think the overall offering as a technology company here is trying to help people get more access and more sustainable access into the stranded energy. And we do think that's a great compliment to the current traditional power system even though if you use the current energy as AIHPC, you do have a way in the future maybe to recycle the heat generated from it and reduce the carbon oxygen emission to the environment. Do you think that those stranded energy sources are going to be the only frontiers, least maybe in North America for hash rate growth in the foreseeable future, given all the demand from AI? Or is that concern overblown? That is not my belief. I think stranded energy will be in different corners and there is a cost to build and maintain at these places. For example, in places where you can use stranded energy as oil-fueled warheads,

13:37the problem is that these warheads are not connected and you have to spend our time to do this and try to use these as backup. For example, you can generate 100% of all of these power resources. You have to have backup and to keep in mind these warheads are not very consistent. So I think a cheap and consistent power source is still the preference for energy uses in states like Texas. When you talk about consistency, they actually also need you to give them flexibility and actually incentivize you if you use the grid power as a Bitcoin manner because they want you to be able to turn off or turn down when they need the power for other usage. And I think Bitcoin is the single most important feature in that state, which I believe actually is favored by the grid players. So in talks with the grid or energy provider or power provider, they like us because we actually provide hash rate to offset the imbalance on the grid.

14:42AHPC not so much because they need to run 20 or 7. They even need background, you know, a second source to help them as a power backup. I do think battery storage is also a solution but it's much more expensive compared to Bitcoin mining. So I still very optimistic about using more power and actually help facilitate the AHPC world because if you think about it on the scale level, AHPC doesn't use that much of a power compared to Bitcoin mining. The per mega was CapEx, it's just so much different. And I think that the growth on grid about power is still going to be a majority on AI Bitcoin mining than AHPC. Of course, if you talk to public companies, most of them would highlight AHPC strategy and they will tell you they reduce or stop using Bitcoin mining as their major CapEx. But for us, we believe they actually work hand in hand. It's not a zero

15:47some got game here. Yeah, there's been a lot of talk about AI or rather Bitcoin mining complementing AI workloads in the sense that you can basically have an energy spun sitting on the side, soaking up electricity that you've already paid for maybe when you're having fewer people using your data center for inference or maybe you're having a wall and a training model, right? You can park Bitcoin miners there, soak up the excess electricity and still monetize it when otherwise your computers wouldn't be. But speaking of A6 and you mentioned your Canaan's Avalon series, I wanted to highlight in y'all's Q4 and four year 2025 earnings. You mentioned that Canaan sold 14.6 ex ashes of new equipment over Q4, representing a 60.9% year-rear growth and 45.7% quarter over quarter growth. What's driving the growth in sales at a time when I would expect sales to be dipping considering so many big miners are getting out of the industry?

16:47The challenge of these industry has always been the volatility. There's volatility in Bitcoin mining economics. There's volatility in supply chain management. There's also volatility in how much inventory are competitors up building out and trying to sell to the market, right? It all depends on each company's different strategy. I believe our competitor were building up huge amount of inventory, which they thought they could place in Russia or China. I don't think that's going to be realistic. As a matter of fact, both China and Russia had pushed out negative or, you know, opposive strategies about Bitcoin mining. So our competitors are largely in trouble right now. I think the growth we did in this company was due to several different factors. First, we focused on North America and we have that strategy to help our company partners, especially public company partners. Our name is known for a very friendly company with a very maintainable

17:54and durable machine. That is a well said in this market. Everybody likes us and also toward that and we also have maintained people and technology people here. We have management, high level management here, station in North America for years, whereas our competitors only have sales people here, which will tell you whatever they believe can help them make their sale. So people know that and in the past, they weren't, and when I say in the past, I mean, 202 and 203, they were trying to compete against each other in the expected hash rate spectrum because back then, if you can prove to the market that you are going to build out a much faster pace compared to your peers, you will treat it favorably and you can raise a ton of capital at a cheaper level of cost of capital. So I think since 2024, a lot of these public

18:57miners started to realize the first, some of our competitors is not as responsible as we are and secondly, they really need to increase the return on investment on these sides because the public market has been a little bit stressed out with the loss. They incurred end of the ATM which they utilize aggressively. So I guess from both the shareholder value perspective and also like the responsible or safety value, security level value, they always favor us as a very transparent public company, but also have a team that can have a meaningful dialogue with the sellers. So I guess that that was a very important factor in taping into North America. You need to build a really meaningful relationship with your customers and partners. And also, I think self mining, we did in North America actually help people use our machines more,

20:01which is important because if you want to buy canons machines, you want to talk to people who had hands-on experience with these machines. And remember, public companies always try to take the maintenance and repair in-house. So even if you work with a couple of public companies, you don't get your name out to the market. You're not part of the ecosystem because you're working on this one-to-wire relationship. So how do we solve that dilemma? We use self mining as an access to the maintenance team and to the local people in different states. So they benefit from our machines. They know how our machines operate and they can tell their friends and family and pass the word out. And that was also helpful to ourselves, not only to the big boys but also to channels and even retail. Or, speaking of retail, our consumer level machines was a big hit.

21:04It gives the market a huge, huge, high-po love in this industry. A lot of people thought it was really cool to be able to plug in a machine at home that actually looked like a furniture. They joked about this past wife test because the machine is designed to be able to run very quietly and look nice and provide heat to the room as a heater. And it's also very easy to just use a cell phone to scan the barcode and can remotely control and make it part of your smart home solutions. I actually just went from a heat punk event in Denver talking to 150 engineers and players and programmers and also the cell, you know, the developers out there who are very excited about us getting more interest in helping them developing open-source technology. I'm glad that you touched on the Avalon Nano. It kind of makes me chuckle thinking about all of

22:08these Bitcoiners around the world looking at their wives and being like, see honey, your father's wrong, it's not a Ponzi scheme, it's keeping us warm during the winter, right? We are CleanSpark, America's Bitcoin Minor, a publicly traded company with the largest operating hash rate powered entirely by self-operated infrastructure across four states. This is our proof of work. We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at CleanSpark.com. I want to double tap on something that you said without getting too much off on a tangent, but you mentioned some of your competitors, potentially over-allocating and building more machines than they could sell, thinking that they would be able to park these in China and Russia. We covered a story at the end of last year about authorities in Xinjiang putting pressure on anywhere, roughly a hundred hexahashes worth of equipment, a gigawatt plus worth of Bitcoin miners,

23:12allegedly still operating in the region according to some of our sources. I would love for you to, however much you can to comment on the situation of mining in China, and if the CCP is actually trying to really mop up whatever is left in the region. Well, first of all, I think a lot of things happening in China is not... orchestra from the top end. I think China is huge. You have consideration from the federal government, you have considerations from the perspective of financial stability, which people would, especially the federal level, they didn't want you to be able to move assets out of China through the mining or through Bitcoin trading, which was one of the reasons why ban it, or of course there are scams, there are waste of power, there are all sorts of narratives. But I think financial freedom is a different concept there. I was born and raised in China,

24:15right? I went to the top university in China, I went to Columbia University for my second law degree, so I kind of compare the two different systems and try to figure out how to understand and see through all these regulations and words on paper. And secondly, I think at a state level, Bitcoin mining was actually helping people, right? It provides jobs, it provides taxes, it gives you a use of power when people didn't have as much as usage of power, especially in the downside economic cycle. I don't want to call it a recession, but it's hard. So people would like to look for Bitcoin miners as a way to monetize their existing power infrastructure in China. And they're pushing more infrastructure into the world. Remember China has a massive solar panel and wind farm parts manufacturing capacity. All these companies have an incentive to work with

25:19people as off-taker of their power and their hardware. So that being said, this market has been unregulated. It had a over-or ban back into 2021 about people working internally and domestically with Bitcoin mining or Bitcoin slash crypto trading, right? So that has been officially banned by Chinese government, but why people started working with them because there's a need in the market, you know? And people at one point, especially our competitors and their customers, had the idea that China government no longer wanted to ban you. They saw the government was going to have a stablecoin, you know? As a leverage over the United States crypto strategy, this China will have its own crypto strategy. We never thought we were eating that possibility and

26:20we didn't think putting our resources in China as a self-minor would be justifiable. First, we are a public company. We have to be reasonable about our investments. And we want to invest our money into an awesome American region as explained. It's probably the cleanest and most expected and easy to understand market. We don't want to risk or just speculate on local changes, especially from the government, right? They're, as I said, their federal level, their provision level, both levels have different considerations. That is particularly true starting from the fourth quarter last year and then kind of lasting to this year that we are seeing our competitors losing control of a lot of their hash rate because of the change in regulatory environment. There's no change in regulatory regime because it's always been banned and always be unwelcome at a federal level. It is your

27:24risk, right? You want to do this and collaborate with low-code power and use Bitcoin as a cover for AHPC data centers, right? Because the ton of data centers that are receiving federal subsidy and also get the federal treatment from energy perspective and they use that as a cover-up for actual Bitcoin money sites. So I think that is a very risky strategy if you ask me, but I'm happy to say that we don't have any exposure in China, whereas our competitors have both high inventory as well as running hash rate that has been clearing out by the market. You mentioned North America a few times, obviously, is a locus of business for Canaan and as one of the main focuses of the company. Are there any other regions for self-mining that Canaan is evaluating and they think this will be a big driver of growth

28:27going forward and the same thing for ASIC sales? Are there any other regions outside of North America that are interesting right now to sell into? Right. You know, we've been looking around for quite some time, right? Even before we had this commitment to the United States, we worked in Kazakhstan during 291-22 and through over, we stopped there, okay, actually we stopped in 204, but we had quite a bit of experience with mining in Kazakhstan. The problem about Kazakhstan and a lot of other countries. First, they don't have enough power to support everyone, right? It's different from United States in some of the states in United States when you start doing something and that if that's proven beneficial for the community, the local infrastructure builder will help you because it's helping themselves, right? In a lot of places, aside,

29:32out of the United States, when you do something, they view this as a competition against their local manufacturing or residential power. So they're not pro-business. So the government will soon turn hostile against Bitcoin mining, even though in the beginning, they might be welcoming you as the only use of their stranded power. So we've seen that, you know, playing over multiple times in different places. And I think to the root of why this is happening, I think United States have these incredible two-layer regulatory, you have interest state businesses which is basically regulated by the state and your constitutions at the county level. And you have federal interstate business that is regulated by federal laws and courts. So that is very helpful for us as a

30:34business because you don't have to deal with the regulatory change at the state level. I'm sorry, at the federal level, you only need to understand what you're doing and how you are helping the community. Because if you can prove your hash rate and your economics has been a great help to the community and economy and jobs, that will give you a treatment that is fair and that is reasonable. And I know in Texas, for example, not just us, but a ton of other players in Bitcoin mining system are helping, you know, giving people, educating people and giving community reward about what do we get. And so I think all these place makers, when they see your operation, when they understand more about the operation, they see your benefits as part of the business.

31:35So they don't want to kind of interview you because that will be unpopular, right? So I think in the United States, you always have two sides. You have different narratives from different parts, but this is more complex than that. In other places, it's just one voice. You know, someone in power could just point finger at you and shut down your business, confiscated it even. So that is the risk I'm talking. This is more fundamental and how you build a country from day one. So that's something we can change. So to address your question, are we considering looking for opportunities outside the United States? We may be looking, but as a public company, I don't think it's responsible for us to invest into these countries without knowing we can continue to operate in 10 years. In the United States, and over or many places in North American regions, you have to be mindful that not all

32:39state are same, but you over or can have a face in the law, right? It's a rule by law. So if you do business here, chances are if you play it in the honest way, there will not be a huge change as to where you can operate or not operation. But in some of places, especially outside the United States, you don't have that critical ability. That's basically how we view this and how we think we should be more focused on North American regions. For the latter half of this conversation, I want to center it on ASIC market dynamics currently. And for I asked the most obvious question about this with regards to AI, I wanted to ask about a news report that was circulated. In November of last year, and I don't know if you can speak to this, but I have to ask it, otherwise I'm not doing my job. There is a news report that said that Samsung had secured a contract with Canaan for next-generation ships on the two nanometer level.

33:42Is this true and does it mark a departure from Canaan working with TSMC? We, I don't think we have public announced the name of 100 partner or the note of the semiconductor chips we are working, but you know, there are just very few names out there you can work with, right? So I think as a technology company, I always want to tap into the most advanced chips, but I also want to highlight that in deciding which nodes we pick, there are a few factors here, right? First, when when we move into advanced nodes from from seven to five to four to three to two, any future maybe into 1.8, 1.4 nanometer, these are, by the way, these are not real physical numbers. These are just marketing tools, you know, to give people something to hand on to, but they're not real to nanometer, you know, in the physical world. But again, it has to get getting into so-called uncharted waters where nobody knows what to do from

34:49architecture to manufacturing to design and to supply chain management, but it's to packaging, right? Even. So this is very, very risky. So when you decide to use one node, it means first you need to kind of commit to 20 to 30 million dollars as a tape-out one time cost, and you also have to be able to draw that wafer and continue to invest into and build out the machines. So you have to kind of try it out without knowing if you wanted to use that node in the first place, because you don't know what the Bitcoin price would be the next year. Are you going to sell a massive amount of machine or are you going to keep them for sale mining that place into your overall capital strategy? And second of all, when you work with a partner, you want them to respect you as a long-term partner, which was one of the reasons why it's getting increasingly difficult for newcomers to get into this relationship. Because if without that relationship,

35:55the resources you can receive from the Foundry partner will be very minimal. And as I said, this isn't like uncharted waters. If you don't have people taking your hands through and give you hints about what is a dead end, you might as well waste a lot of resources and R&D in time in trying to do something that is not important. So from the Foundry's perspective, when then look at you as a potential customer and long-term partner, the first thing they want to look at is your track record. They want to see if you had a successful track record in taping out and getting very successful and competitive hash rate from the single note, or three major manufacturers have a plantation to be given to the Foundry for each new technology. And you want them to see that you have the team and you have the expertise to help them

37:00lock down their volume. Without a volume, they don't want to help you. So this is more like handshake and agreement. You need to prove to these people without putting money in their plate before the tap out has been done. So they want to look at your balance, they want to understand you can provide them with liquidity to help them sell their machines. Of course, nowadays it's less of so because this year, these Foundry partners getting all these incoming orders from CPUs and mobile and AHPC chips makers. So they are not pressing us for taking more capacity from them like they did in 2022 and 2023 or even 2024. But you know, I tend to think this is a very, very long-term play. So the challenge is also on the volatility of prices. So if you look at some of the names that's out there, they claim they can make chips and machines work. They have to also convince their masters that the business they are in is going to

38:05last and the machines they're producing is going to be more and more competitive and on par, finally on par with all these major players. This is a very difficult case for them to make to masters, especially when you see Bitcoin drop from 120,000 to 70,000. So I guess all in all, we should view this as a very long-term technology partnership between the designer and the Foundry partner. And I'm sorry, I'm kind of evading from the question you asked. But I think this is important that no matter if you're working with TSMC or SAMHSA, they both look for the same commitment and partnership and also the support from our design team. So I'll step up here and see if you have something to add to that question. No, I appreciate that. That was very detailed. I know there's only so much you can say before the company says anything. So I appreciate you

39:05fielding that to the best of your ability to what you can say. You mentioned there that the Foundries are not really pressing the Bitcoin mining manufacturers to maybe not overallocate, but to take a little bit more to have a little more way for allocation than they have in the past. Because of the demand that we're seeing from all these other sectors, including AI and HPC, I'm curious, is there a point at which that goes the other way where Bitcoin mining manufacturers might be worried about not being able to get enough allocation because there's so much demand from other sectors? If we look back in the history, when we started building the same ASIC back in 2012, the December of 2012, and we came out with the first generation of miners, everybody was crazy about the return. They can't get the investment back in a week. So back then, all these OGs in the industry view

40:07Bitcoin miners as a money printing machine. Our company is more focused on the overall ecosystem contribution. We had that view launched long before Bitcoin was like a ministry of assets. We have to prove as a group of Bitcoiners that this is not some sort of scam. This is valuable to the human society. And we want to make sure it is decentralized as much as possible. So actually in 2013, we distributed these machines to different places intentionally and never and didn't keep any for our own founding members to for sale mining because we didn't want to compete against our customers. We want our customers to grow into a huge success for business so they can spread the word. They can be examples for followers to come into the business. What we didn't understand was that a lot of people were too

41:08kind of hinged to these money making theory. And they thought this is like printing money in the short term and you have to time the market correctly so you can sell them at the top and buy them at the bottom. So that speculation might set give a lot of people in this industry including some of competitors and maybe some of our team members too that we wanted to be able to time the market and to foresee what's going to happen next year. So this is including so during a bear market ironically. So in the bear market when the Foundry partner come to you and they say well this is a crypto market, crypto winter we know it but it's also bad for other industries. You know crypto tend to play with all these. It is the monetary effect. You know you have a weaker economy, you tend to also have a weaker crypto price. So

42:10come to you and say can you help us, can you give us an order to book for more miners. So everybody realized that triggers from the old experience that next year could be a huge bull market and we are running out of inventory. So all these mining manufacturing decision makers they say okay maybe I can place that a bit more inventory to take events. Nobody can predict the market. You just can't predict the market. Especially when Bitcoin become a public market stuff. It's not just a very niche market where all these family and friends are trying to invest and speculate. It becomes mainstream investment and the public companies wanted to make sure they're responsible to their shareholders. Like what's happening last year is actually eye opening. A lot of these mining manufacturers won't expect their customers to pivot from Bitcoin

43:12mining to AHPC which kind of reduced the demand. And also the Bitcoin price is something people always wanted to predict. They thought it's going to 200,000 to 150,000 which didn't happen. And that is more like a pivoting time when you realize that maybe we've viewed out too much inventory but maybe we hold down for a couple of months and it will go back. So when the bear market comes it was unsurprising to us because we knew the bull market has been low enough for the cycle. But for some of our competitors maybe it's pretty surprising because they thought if they didn't thought that there would be a high, high, there would not be have manufacturers so many machines. So I don't want to attribute that. I'm saying this only because I don't want to attribute that huge inventory to the foundries. You always have a choice to make. Of course

44:20they would like you more if you give the money to prepay for the chips but it's up to you as a designer to say no to the foundry partner. So that is always the case from these industries players. So if you want to be more speculative be my guest. It kind of addresses the dynamics behind them pushing for more allocation but I'm specifically curious if you think that the demand that we're seeing from these other computing loads like with AI and HBC will eventually push some of the manufacturers out of the picture entirely for some of these foundries. Or is that unfounded? I don't know. I don't think capacity is an issue. I don't feel capacity is an issue. I think there would be always shortage and there will always be access but I think in the longer term it's balanced. All these foundry partners, whether it's TSMC or Samsung,

45:22they have a huge research team. They're looking to a decade to take to weigh in what they should invest into because remember they are playing a very long term CAVX play. When they buy machines, machinery, including EUVs from Asma. It's a very big commitment. They're making billions of dollars into next generation's investment. If they do it without knowing the industry is going to have demand for that, they won't be doing it. Bitcoin manufacturers happen to be one piece of the puzzle but not the whole puzzle. So I would say when they design their capacity, they view Bitcoin as part of the potential but not the overall picture. Especially I won't even say the most important piece of the puzzle. That's good context. Thank you, Leo. I guess maybe for a closing question or one more question

46:27before I get final thoughts from you, we had covered the Q4 results for Kane in earlier in the show. There was a bump year over year and quarter over quarter for ASIC sales and I will say that's surprising to me in the sense that I would have figured sales not just from Kane in but from other mining manufacturers to be lagging now that a lot of their biggest customers, the public miners are starting to go full bore into AI and HBC and they're slowing down rig orders or just completely getting rid of their mining fleets entirely. How have the AI pivots impacted this market and where do you think it's going over the next two, three, four years? That is a great question. That is also the question that keeps me up in the night. I do think we should embrace AI HPC. We should embrace AI as a huge change to how we manage our personal life and our professional lives. Lots of jobs will be replaced by AI.

47:30This is just a very, very important awakening core we have to make. Is this going to be replacing all of Bitcoin manufacturing and Bitcoin mining? I don't think so and the reason I don't think so is because Bitcoin is valuable as an asset class but it also has some presets here. One of the presets is every four year Bitcoin will have its halving event which will reduce if the Bitcoin price don't double will reduce the economics income from all the mining operators across the hash rate. To some extent if the hash rate drops it will help with the competition landscape from a mining perspective. We all have in our mind that in by 2028 there will be the next halving. What do we want to do as a company in this industry forever if the halving is there

48:39and become price doesn't go to 300,000 dollars? What are we going to do? Is there going to be another bull market for Bitcoin? Absolutely yes. Is there going to be a bull market for Bitcoin mining as a whole in this industry? I don't know the answer to that question because it is not the AHPC that's taking away the attention. It is the economics of mining itself that is going worse by time because first companies like us are manufacturing. Our competitors ourselves pivot into a fully integrated Bitcoin mining model which is the reason why Cypher wanted to own our shares as a shareholder they see value as an integrated miners here but also if there's massive operations across a board it's getting increasingly difficult for new miners

49:41to make money from from this industry. It is not like five years ago when you if you had access to a miner you would make a lot of money. Right now it is very challenging. Bitcoin has dropped to 65, 70,000 and the hash rate hasn't reduced that much. The reason for the hash rate not being reduced by that much just addressed to your question where they replace by AHPC demand. It is not replaced by AHPC demand. People are still keeping their hash rate online because first they need revenue even though they are not making money. As a company they might need revenue to keep their jobs and secondly it has been used as a just a balancer for the grid with increasingly higher usage from AHPC and we know AHPC is 24-7 you can't shut them down so they need

50:42Bitcoin to take the peak of the electricity network so they can grow the grid and grow the power ecosystem. So I think becoming mining will last. It will be continue to be part of the overall energy map which is also why we're looking for alternatives to use our technology to help people you know kind of highlight the the heat recycling you know the the very cool home mining you know and also the power grid balancing features of this technology. We still think this is very important but we don't we don't think the monetary benefits will be a key driver after 2028. I hope I'm wrong I hope Bitcoin goes to have a million dollars by calling and you know everybody's starting to jump into the business again but that is the part that I can predict you know I I don't have a crystal ball for that. Man if only we all did everyone be rich well Leo that was great I think we'll leave it there that was a really nice closing question

51:46appreciate you hopping on it's really really fun conversation and best to look to Canon for the rest of the year. Oh thank you so much Colin. Hey this is Charlie and Colin from Block Space Media and you're listening to the Block Space podcast a show about emerging tech in Bitcoin AI energy and markets. We published two interviews weekly with CEOs investors analysts and anyone else of consequence within these spaces. Plus we have a weekly news roundup for all the important stories you might have missed from that week. The show is perfect for retail and institutional investors analysts and really anyone who wants to keep their finger on the pulse of the stories that are moving Bitcoin energy and data markets. So if you've stumbled across us make sure to search Block Space wherever you get your podcasts and on YouTube hit the subscribe button give us a rating. We produce bonus podcasts and other content on our main feed so you don't want to miss

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