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The FTX Collapse Reminds Us Bitcoin is Not Crypto

Season 3: Bonus Episode 11


Bitcoin, BTC, Cryptocurrency, Data Centers, Investors

Listen now on Apple | Spotify | SimpleCast

[02:15] First things first, what the heck happened? We woke up one day and there were suspicious Twitter threads, drama, and finally a collapse. How would you explain the FTX situation to a novice?

Phillip Ng: I would explain it as winding back further to set the scene. 2020, you have COVID and what’s followed is the most incredible economic stimulus and monetary stimulus that we’ve seen in history. The financial crisis in ’08, the conclusion, the criticism that policymakers took away was that they did not do enough, quick enough to really stave off the economic malaise that followed. In contrast, in 2020, you have something that’s slightly different. You have an event that’s not political, there’s no one to blame, it’s a pandemic. There was a lot of support to put a lot of capital into the system. The repeated theme was, “Let’s overshoot, not undershoot.” And so what you see is an incredible expansion of money supply, an incredible amount of money going into people’s pockets, and a real euphoria in all asset classes from real estate, crypto, and traditional businesses.

[12:00] What’s the next market going to look like? What should people expect? And what do you say to them that should be learned here?

Phillip Ng: I think if you rewind back the clock to 2018 and you think about where Bitcoin, crypto, and flexible data centers are from now till then, it is almost incredible actually how much progress has been made through the cycle. The cycle is the noise and the signal is what’s transpired over the last four years.

[24:50] Briefly, can you explain why Bitcoin is so energy intensive?

Dip Patel: Yeah, basically because it’s designed to be.

[28:10] What’s your pitch to renewable energy developers, and power plant owners? How do you position building a bitcoin data center co-located with their facilities and how it addresses their issues?

Phillip Ng: It’s pretty simple. When you produce power, you need to sell power and you can sell it to basically three options. Most conventionally, you sell it to the grid through the grid to users on the grid system. Renewable assets are challenged in so far as their generation co-varies. So if you have zero marginal cost, when you’re bidding at zero, everybody else is bidding at zero. What happens is there’s a rush of renewable energy that tries to get on the grid all at once, it has not have enough users to fully absorb that amount. So as much as a third of renewable energy can be wasted depending on the season and the geography that we’re talking about. That is a tremendous untapped resource and it is a tremendous drag on financial returns to renewable power plants.

[31:20] What prediction for the coming year would you like to see, would you love to see, I would say? And it could be anything, but what would you like to see, particularly around this whole crypto space and Bitcoin space?

Dip Patel: I’d like to see more Bitcoin deployments that scale their power on and off to meet the needs of green energy sites. A lot of lip service there, JB. It’d be nice to see more deployments of it.