For Genesis Mining CEO Marco Streng, 2020 proved to be a milestone year for blockchain technology and cryptocurrency due to the convergence of a number of factors, including weakening U.S. dollars and large institutions welcoming digital currencies onto their platforms. The 31-year-old CEO, who co-founded Genesis Mining in 2013, has witnessed the industry mature from a concept promoted by a small community of impassioned coders to a recognized and increasingly credible alternative system of payment.
In a special conversation with YPO global chief executives during a recent visit to Dubai, United Arab Emirates, Streng, a member of YPO, shared his entrepreneurial journey and insights on Bitcoin’s recent market gains.
Bitcoin: Recognizing the opportunity
Streng’s passion for blockchain technology and cryptocurrency ignited in 2011 while studying mathematics at the Ludwig-Maximilian University of Munich.
By late 2013, as Bitcoin prices surged from USD100 to USD1,000, Streng was well positioned to leverage the liquid market opportunity. “At first, I set up a mining device (a server to start mining bitcoins) in my student dorm. My partner and I quickly recognized we were in the middle of a gold rush, and we started the first large scale facility in 2013. From there, we built more data centers in Eastern Europe and the Nordics.”
Today, Genesis Mining has become a leader in cryptocurrency mining industry, with multiple crypto farms across the globe and also providing a platform and the expertise for customers to run their own mining operations efficiently.
A milestone moment
In a year marked by a global pandemic and economic crisis, the price of Bitcoin has exploded nearly 150%, returning to its previous all-time highs in in December 2017. For Streng, there has never been be a better moment in the 11-year history of Bitcoin.
“This is the year when institutions, big corporates and professional money have entered the space. Now Bitcoin and cryptocurrency are not only widely accepted, but really appreciated by big money,” he says citing PayPal’s decision to allow access and integration of bitcoin and payments company Square’s investment in bitcoin. “I never believed that we would find ourselves again in a situation like this, at another all-time high, more than 10 years since it was founded in 2009. It is still a very wild and interesting ride.”
— Marco Streng, CEO, Genesis Mining share
Streng adds that while the market volatility remains, cryptocurrency’s unique features make it “absolutely” sustainable. Blockchain, which is the underlying technology used by Bitcoin, is based on open-source software and therefore available to anyone. Digital currencies are also decentralized, not tied to a specific country, central bank, or currency is and are independent of the financial market.
In terms of concerns of governments shutting it down, Streng says that while 10 years ago this may have been a legitimate concern, it seems less unlikely now. “We have seen the space getting more regulated. Government strategy has been to try to regulate not ban it. Many countries also fear banning it as other counties might embrace it, so they risk missing the train.”
What investors need to know
With renewed interest in Bitcoin, Streng offers the following insights for committed investors looking to capitalize on the latest price resurgence in the historically volatile Bitcoin market.
- Use of exchanges and credible wallets: Investors keen on buying Bitcoin have a choice between many exchanges and wallets. They can get information on suitability for their own needs on many great online sources, for example bitcoin.org, says Streng. “Bitcoin now is a very liquid global market, and there are multiple billion dollars of trading volumes every day. So, there are easy ways to buy and sell by signing up on one of the reputable exchanges or sending to your own Bitcoin wallet.” However, he adds that investors need to be particularly careful to find credible wallets as there are currently a lot of fake wallets in the market.
- Bitcoin versus Bitcoin mining: Streng explains that Bitcoin and Bitcoin mining are two different asset classes and have different risk perspectives. While trading in Bitcoin is comparable to speculating on stock prices or commodities trading, the mining business has another dynamic comparable to mining physical gold except that there is a fixed number of Bitcoins that are emitted every day, namely 900 Bitcoins a day. With only 21 million Bitcoin to be issued, a little under 2.5 million Bitcoins remain for mining.
“In mining, you have a continuous stream of Bitcoins that are produced day by day,” Streng explains. “When the price goes down, if you are one of lowest producers, you can remain and be profitable. If however you are not among the most efficient miners, you can get squeezed out. So given you are an efficient large scale miner, you have a protected downside, but also a strong upside. It is therefore strategically better to be on the mining side than on the Bitcoin trading-exposed side as mining has that compensated downside. But this applies only for the lowest cost and the most efficient miner.”
Typically, efficiency is achieved by large-scale miners through low electricity cost and machines and infrastructure optimization. Server farms situated in cold climate with access to cheap electricity have helped create that efficiency for Genesis Mining.
- Diversification into other cryptocurrencies: “There are many other cryptocurrencies to Bitcoin, and because the source code is open, everyone can create their own cryptocurrency. But that doesn’t mean other currencies have value,” says Streng. “Bitcoin for sure is leading, as it is the first blockchain and the largest with regards to transaction volumes. But others like Ethereum have other valuable features (like smart contracts). A lot of people enter cryptocurrency via Bitcoin and then discover others to diversify their”
- Safe haven for turbulent countries: For countries in financial crises or with capital controls, Bitcoin is in high demand as it represents a safe haven asset not tied to a specific country or currency. “Countries in extreme inflation like Venezuela find investing in gold a good option, but it (gold) is difficult to transfer. Bitcoin is basically gold 2.0.”
The future: Bitcoin at USD100,000?
As someone who has witnessed this evolution firsthand, Streng remains a passionate advocate of its long-term value. Asked whether Bitcoin will reach a USD100,000 valuation, he replies yes, even much more, but it is impossible to make short-term predictions on the future of Bitcoin.
“From the beginning, I knew that on the longer term, Bitcoin would be very binary. One scenario is that Bitcoin will not exist. The second is that it becomes a lot more valuable. The scenario of Bitcoin getting to zero is looking much more unlikely,” says Streng. “Meanwhile, with only 2.5 million Bitcoins left, a lot of things are possible from now until the end of 2021.”
Following the conversation with Streng, Rohit Hemdev, CEO at Taurus and YPO member in Dubai who organized the event added, “Business leaders are lifelong learners and Bitcoin is emerging as one of the hottest investment opportunity in the financial markets. But for many investors in tangible assets, it remains a black box. This event helped us understand how cryptocurrencies are entwined with blockchain technology and mining and how to leverage investment opportunities as blockchain technology regains momentum.”
