Bitcoin miners are no longer just digging digital gold and selling it immediately. As the industry matures and institutional capital flows in, mining companies are each developing a sophisticated bitcoin treasury strategy that goes far beyond the binary choice of “HODL or sell.”
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Take CleanSpark, for example. The bitcoin miner has over 12,827 bitcoin on its balance sheet, and it doesn’t just let it sit. Rory Murray, the Director of Digital Asset Management at CleanSpark recently joined the Gwart Show to discuss how one of America’s largest Bitcoin miners approaches its bitcoin treasury strategy.
Below is an edited transcript of the conversation.
From Wall Street to Bitcoin Mining
Where do you work and what do you do?
I’m in scenic northwestern Connecticut, about a couple hours outside New York City. I spent eight years at a global macro fund called Discovery Capital. Discovery Capital was started by Rob Citrone, who started the emerging markets desk at Fidelity in 1993 back when what we’d probably call frontier markets today were what they were calling emerging markets. He then went to Tiger Management under Julian Robertson, who was really one of George Soros’s contemporaries at that time.
I joined in 2011 and was there till 2019. That was really a fantastic way to start my career because I started on the trading desk and got a front row seat to the blow-ups and blow-ups of the emerging market complex with this macro investing background.
I got bit by the Bitcoin bug in 2013. Like many enterprising young people on the street, I thought that a growing asset class and interesting technology would get everybody super excited. But I was swimming upstream to get people on side with this idea. First it was “too small for us to look at,” then it was “too weird,” then it was “too dark web.”
I left in 2019 with the idea that the world was changing. When you’re a global macro investor, you’re sitting all the way at the bottom waiting for a whole lot of other decisions to happen. You’re waiting for policy to get set at the White House, waiting for the economy to shift, waiting for the company to report the quarter, waiting for analysts to recommend the trade. I was really interested in taking these financial principles and going to this nascent, emerging, global monetary alternative and building something where you could both apply these financial principles but also build in this new space.
You were at Griid, which was then acquired by Clean Spark. What was your role there and what did you transition to?
When I left in 2019, I went and did a coding bootcamp. I realized that everything is becoming a technology company. You can read a balance sheet, income statement, and cash flow statement, but you also need to understand the inputs and outputs of computers.
I was building a P2P exchange using atomic swaps between ETH and BTC using Rootstock. My heart was always in Bitcoin though. I talked to my friend Harry Sudock, who I met at an Unchained event in February 2020 – I’ll always remember that day because it was the very last time I went out before the world shut down for COVID.
Summer of 2021, Harry said, “We’re about to go hyperscale this thing. We’ve spent two years in the trenches building out a power pipeline. You have this trad-fi background, you have this computer science native background, and your heart’s in Bitcoin. Come help me think through what the next iteration of capital markets and market intelligence at Griid looks like.”
Griid had exactly the right idea and tried to do it the right way. Power is local – you have to meet the utility, talk to the city manager, find the land, deal with the neighbors. Griid had really solved that problem. But capital markets froze up. It became a knife fight for a year and a half. We had Terra Luna, Celsius, FTX, Three Arrows – things just got really tough for a couple years.
We popped out in 2024, Bitcoin had started to recover, and the power markets had totally turned. The AI/HPC story had started to come along. CleanSpark is America’s Bitcoin miner, and Griid we had a very American ethos – we fab our containers in Rutledge, Tennessee, we hire local, we hire Bitcoiners. The geographic footprints really made sense. The DNA of the companies were really similar. Clean Spark had a lot of power but needed more. They had access to capital markets, machines, and an aggressive growth timeline.
CleanSpark’s bitcoin treasury management
You’re Director of Digital Asset Management at Clean Spark. What does that mean?
I lead our Bitcoin treasury management efforts. When I joined, there were a lot of ideas of what it could mean. What had changed from the last cycle? In the last cycle, everybody criticized miners for not having hedged. You were really not rewarded for that. The market was rewarding a very YOLO leveraged retail plan in 2021. The organizations that followed that playbook went down 85-90%, and the ones that didn’t went down 99% and ended up merged into somebody else.
As the asset class matured, you had ETFs – a financialization of the asset class. The size of the asset class changed. You have institutional coverage now with guys like JPMorgan covering the space. You have institutional ownership, a larger and more liquid asset class, and financial products around it.
CleanSpark had always been countercyclical, which really fits my ethos. They sold all their Bitcoin towards the top of the last cycle, started adding again towards the bottom, and grew in this countercyclical way. When I got here, the idea was: how do we take these good decisions they’ve made over a couple cycles and systematize it into our business? With the increased size of the asset class, liquidity, and maturation of financial products, it made sense to have somebody look at this full time.
The CleanSpark bitcoin HODL strategy explained
Break down your HODL strategy. You’re selling on a monthly basis to cover opex, but you also have this HODL strategy. What does that mean?
There are three main buckets of HODL or no HODL. There’s the commodity business purely – we mine it, we sell it, we turn that into cash. There’s the full HODL – not only are we going to hold what we mined, we’re going to issue debt and equity and add more to it.
We’re strategic, not ideological. We’re a hybrid model. We have 12,703 Bitcoin on the balance sheet – that’s about a billion and a half dollars of Bitcoin. We’re adding a little bit more every month. But we’re also looking at how to be the most responsible stewards of capital in this business.
We assess our cost of capital on a holistic basis – straight debt markets, convertible notes, ATMs, Bitcoin-backed lines of credit, selling the HODL. First and foremost is to cover the opex, which is the ongoing cost of the business. Second, how do you fund CapEx? We have up to another 10 exahash that have to be funded. Finally, you want to be a responsible financial steward and always be liquid.
CleanSpark’s advanced Bitcoin treasury strategies
Given the mania around MicroStrategy and financial engineering, how do you think about maximizing the utility of your balance sheet versus your actual physical business?
I went and read every 8-K, every 10-Q, every release. I watched every podcast. I came to the conclusion that Saylor really was onto something – that volatility is vitality has real meaning, that arbitrage across capital markets is a viable and reasonably sustainable strategy, at least for a first mover.
The two key insights were: First, risk isn’t volatility. Risk is the chance of permanent loss. There are specialized investors in convertible bonds who benefit from the volatility. Second, you have all these mandates – $300 billion of dedicated commodities investors, $3 trillion of dedicated credit investors. Bridging the gap between those pools of capital, bringing them into a Bitcoin-linked instrument and flipping the script on what’s traditionally been modeled as a risk into actually an asset – I think it was an incredibly brilliant insight.
Where I worry is like any capital market cycle – a good idea gets overdone. If the idea is just there’s a multiple on issuing equity to buy Bitcoin, I’m pretty confident that’s going to collapse at some point. Where I do think there’s sustainability is in arbitrage across capital pools and across structural, regulatory, and geographic environments.
Structural alpha in bitcoin mining
How does Clean Spark think about positioning itself with a real business behind it versus pure financial engineering plays?
That is exactly the thesis. There’s a cycle to the entire mining playbook. You want to run as fast as you can to get as much Bitcoin on the balance sheet as you can because it’s pristine collateral. You also have power, industrial, real things that hurt when you drop them on your foot. And now you have a rapidly developing financial market around this global emerging monetary alternative.
We have a business that is triple levered to Bitcoin. We have our HODL, we have our ASICs which are priced in Bitcoin, and theoretically you have the growth multiple on the business. As the price of Bitcoin increases, our margins increase, our bottom line increases.
What can we do with that to take advantage and create structural ballast against that cycle? The very simple example is call overwriting. We’re long the HODL, long the future production, long the ASICs, long the energy, long the growth multiple on the business. I can sell call overwrites into the market. If things go down, I kept premium and can write it again. Those at-the-money yields are still great premiums.
If we go up 20% in Bitcoin, I’m happy to sell at $125K. We get up to $148K in the next couple weeks? Honestly, I’m happy to sell there. We’re going to pay salaries and pay down some debt. We get to be opportunistic. We have all these levers in the business that allow us to take advantage of that.
Practical examples of bitcoin treasury innovation
Can you give a concrete example of how this works in practice?
We talked about in our earnings report that we’d gotten an option via one of our suppliers. We were looking at making a big ASIC purchase in April during peak tariff uncertainty. What the arrangement was: we pay for the machines in Bitcoin at 115% rate on that Bitcoin – essentially getting about a 14.5% discount. Then we get a call option to buy that Bitcoin back in six months.
Because we have this institutional trading desk setup – we’ve gone through the KYC process, negotiated the ISDAs, signed up counterparties, worked on accounting internal controls – we were able to look at this strategically. When we got up to $118-120K, we said operationally it would be complex to raise the cash right now and fully exercise the option. But what I can do is hedge this option out – I’m long a call option, I can sell a call option and lock in that premium.
We were able to hedge that out in the mid-teens over a couple weeks. Now we’re back down to $109K. We’re long that call option. We could theoretically trade around it, buy back the call we sold if we think it’s going higher, or sit on the pretty significant premium we’ve generated.
That’s not an opportunity that’s going to be available every quarter. But it’s a really good example of what an institutional-grade Bitcoin treasury desk can afford an organization over a cycle that takes advantage of our world-class mining operations.
The five types of alpha
How do you think about generating alpha in this business?
There are five ways to get alpha:
- Information – Better information than somebody else
- Analysis – Take the same information and analyze it better
- Behavioral – Better temperament. You freak out, I don’t
- Technology – Better pipes, like you see with HFT
- Structural – This is really the most interesting for us
We have pieces of all the other four, but the fifth is where we sit. What has been thought of as a liability in the past – that when you’re up you’re really up, but you’re really leveraged to that cycle – there are ways to structurally take advantage of that.
We’re not building a hedge fund. This is not supposed to be a gunslinger trying to make 20% on our money. This is taking the cycles in the business on the opex side, cycles on the CapEx side, and recognizing the structural setups in Bitcoin capital markets. How do we marry those to turn what’s a liability into an asset, or at least neutralize it? Can we optimize marginally – get 3-5% more out of our money, sell 3-5% higher, buy 3-5% lower, monetize something six months earlier?
The difficulty adjustment does the rest. You get to be a big enough portion of the network. You have economies of scale on operations, on power. And now you can have economies of scale on capital markets. That 3-5% in this business over a cycle – that’s the difference between being a top miner and sitting at dinner with your wife going “what the heck am I doing here?” like I was in December 2022.
The economics of bitcoin mining
Your cost to mine Bitcoin is around $35,000. What does that actually mean?
That’s in the $35-45K range without depreciation. My understanding is that’s the electricity cost and direct cost of operation – your site techs, electricians, lease rent on the sites. If you go to the site, everything you see going on there is the cost to mine Bitcoin. It’s basically like if everything went to zero tomorrow, can you still get that Bitcoin out of the ground?
Those are very good margins relative to Bitcoin’s price. How do you look at the state and health of Bitcoin mining as an industry?
You don’t get into this business if you want it easy. It’s tough out there. But the difficulty adjustment, economies of scale, and ancillary power services and financial services opportunities are all real interesting and sustainable paths forward.
Bitcoin mining is a lot different in the top five than it is in the bottom five. You’re not mining the same Bitcoin. If you can stay ahead on power costs, people costs, leverage – like the option we had with our supplier where we buy hundreds of millions of dollars of equipment – you have pricing power on equipment, pricing power on the power side, economies of scale on operations.
The future of bitcoin mining
Do you foresee Bitcoin miners becoming energy companies that mine Bitcoin on the side?
Yes, it’s all of the above. My model is Standard Oil. You start by rolling up all the little oil operations, you standardize the quality, then you design the rail car so you have efficiency moving things between them, then you have the trade financing side and distribution side.
The Bitcoin business is always going to be there and profitable at scale. But it’s going to ultimately allow you to be a very large revenue item, even as margins compress. What does that give you? Access to capital markets, ability to service debt, opportunity sets to fund new opportunities.
You have the commodity production side. You have the energy and infrastructure side, which is a major mega theme. Even if we’re off by half on our projections, we need to increase energy production in the US by 50-300% over the next ten years. You have the float – even if margins compress, you’re driving enough top line that it continues to give you access to capital. And then you have the financial services side – the Bitcoin banking side.
We’re using Bitcoin to collateralize our loan with Coinbase, taking in dollars to fund new growth. That’s one product, but there are all these other products I’m really excited about. Bitcoin is pristine collateral – zero counterparty, global, decentralized, permissionless. You can take it across the border in your pocket. It trades 24/7 and you can liquidate it on weekends. That to me is a perfect asset to serve as collateral.
Building the future of bitcoin finance
What excites you most about where this is heading?
We don’t want to just create the same TradFi cycles on this new financial instrument. But credit’s been around for 3,000 years. There are ways to adapt and adopt some of those products that help human flourishing.
What’s at the heart of the United States economy? Why is it the best economy in the world? Because you can make things and you can price things. You make things because we have access to reliable power, and you can price things because we have access to deep capital markets and strong contract law.
There’s a big difference between benefiting from the Cantillon effect of being one of 13 banks with access to the Fed window versus building a hybrid credit product priced in Bitcoin at a Bitcoin interest rate and Bitcoin hurdle rate. We don’t know what the hurdle rate is yet for Bitcoin – MicroStrategy is doing something very interesting, rapidly developing the yield curve on Bitcoin. We’re going to take that outside of a single company and bring it across the entire market.
There’s nothing inherently wrong with credit. What’s wrong with credit is if it’s mispriced and misallocated. We have an opportunity to build very interesting new things that can adapt traditional financial instruments onto this global emerging monetary alternative and this immutable, pristine collateral.
