Mustafa Yiham (Bixin) on the industrial Bitcoin miner perspective [transcript available]

Mustafa Yilham, VP of global business development at Bixin, joins the show. Bixin is an early Asia-based Bitcoin miner; they operate a popular wallet app, and they run a Bitcoin-denominated quant fund of funds. We cover prevailing myths around industrial Bitcoin mining and the reality of sourcing energy at competitive prices for mining. In this episode:

  • The story behind Bixin’s Bitcoin-denominated quant fund
  • How Bixin’s fund of fund employs a Bitcoin benchmark
  • Why Bixin as a firm is not market neutral and does not hedge their mining operation
  • Whether miners have a procyclical or countercyclical effect on the price of Bitcoin
  • Whether or not miners are fundamentally long Bitcoin
  • The key considerations for finding a good source of electricity for mining
  • Why Central Asia, Russia, and North America are promising locations for mining
  • Why Mustafa expects more hashpower to end up in North America in the near term
  • The factors leading Mustafa to expect less hashrate concentration in China in the future
  • Whether the CBECI mining map is a reliable guide to where mining is located
  • Miner attitudes to Iran and OFAC
  • Current electricity prices required to competitively mine
  • What sold out hardware means for the price of Bitcoin
  • Was the hashrate drop earlier this year was due to the seasonal migration of hashpower in China?
  • Bixin’s approach to seasonal electricity costs
  • Whether the withdrawal issues at OkEx and Huobi prevented miners from selling and ’caused’ the recent Bitcoin rally
  • Mustafa’s take on the “China controls Bitcoin” narrative
  • Why Bitcoin mining is getting progressively more decentralized
  • Why Bitcoin miners are positively disposed towards Bitcoin
  • Whether Bixin plans to support Taproot
  • Mustafa’s view on who controls Bitcoin
  • Mustafa’s experiences in Turkey and why Bitcoin is so popular there
  • Why central asian and post-Soviet households like gold

Sponsor notes:

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Nic Carter 0:00
Mustafa, welcome to the show. It’s such a pleasure to have you with us today.

Mustafa Yilham 0:07
Yes, thank you so much for having me today, Nic, really appreciate it.

Nic Carter 0:11
I’ve really been looking forward to this conversation. Actually, I think we’re gonna learn a lot about mining in particular. You’re a wealth of knowledge on the topic. So I’m super, super pumped. Why don’t you tell us a little bit about your role at Bixin and your responsibilities over there? And also, tell us about Bixin too, because I don’t think Americans are sort of as familiar with it.

Mustafa Yilham 0:41
Sure, sure. So my current role at Bixin is vice president of global business development. And my main task, you know, is to help different subsidiaries on their Bixin group to expand internationally. And to tell you a bit more about Bixin mostly have two different business focus. One of them is Bixin wallet, and another is Bixin finance. We are one of the largest blockchain crypto wallet provider in Asia is I think, currently, 1 million registered users and Bixin wallet offer different services to its retail clients such as custody, escrow, trading, lending, payment, cloud mining, etc as part of its ecosystem. And at Bixin finance, we run two very large operation like Bixin mining and fund of fund. We currently manage around 300 megawatt of power roughly that’s currently equivalent to 2% of global Bitcoin network. We are also very early investor in Whatsminer which is one of the largest mining manufacturer. And on the fund of funds side, which we announced earlier this year. We currently have an asset under management around 7000 Bitcoin with the main purpose of investing in global crypto quant funds. And you know, the fund is completely Bitcoin denominated and also supported by our prop capital. And lastly, we also have $100 million fund that is focused on open finance venture investment. Previously, we invested in companies such as micro bt, whatsminer, nervos, algorand, arweave, etc. And, you know, our newest investment is to a $2 million Asia lead investment to Mina protocol, formerly known as Coda.

Nic Carter 2:40
That’s a lot of separate concerns within one institution. Mustafa.

Mustafa Yilham 2:45
Yes [laughs].

Nic Carter 2:46
I dont know how you manage it all. There’s so many things we can cover, maybe we can start with the Bitcoin denominated quant funds, because that totally blew my mind when I first heard about it. So the objective of that fund is to invest Bitcoin in sort of arbitrage for quant funds. And actually, you’re not targeting fiat returns, you’re targeting returns against your Bitcoin benchmark, right?

Mustafa Yilham 3:14
Yes, so the fund of fund is completely Bitcoin denominated. So we are targeting returns only in BTC. And you know, the main goal is to obviously increase our Bitcoin holding and at the same time hopefully provide liquidity to global Bitcoin network.

Nic Carter 3:37
Have you found that the managers that you approach have been amenable to using Bitcoin as the index and only kind of taking carry if they beat Bitcoin?

Mustafa Yilham 3:49
So I think that have a slight difference between quant fund in the West and Asia. And, you know, we we actually started investing in crypto fund quant funds since last year in China. And after we announced the news this year, we started to build more global presence on the investment side, in US, Europe, Russia, the Singapore. In China, most of the quant managers are very used to Bitcoin denominated terms when investing in crypto funds. And outside of China and most team we spoke to offered USD denominated terms. I think that’s mostly due to regulation and institutional investor preference that these teams are there are potential investors. But I think that’s like rapidly changing now, starting quarter two this year, more team actually have come back to us and told us, you know, they now have a Bitcoin denominated terms on more us teams we spoke to no also have a Bitcoin denominated terms.

Nic Carter 5:06
And so your perspective as an institution as you’re just interested in increasing your stock of bitcoins, as opposed to its value in fiat terms, because I guess in your view, that’s the most important thing is gradually growing your share of bitcoins. Kind of on your balance sheet is that right?

Mustafa Yilham 5:27
Yes. And you know, when we first announced the news, us it was a huge surprise to a lot of people. I think it was May where we put in right 6600 Bitcoin and at the time, you know, people were very surprised because this this portion is all hatched. It’s one zero Fiat 100% Bitcoin denominated, but you know, six months later now, the original value, I believe was around $66 million with 6600 Bitcoin now the asset under management is at 7000. Bitcoin with overall value in fiat value over $130 million at the fund of fund alone. So that’s like two x, then, I think now six months, and, you know, people start to change their view on whether it be a right decision or not,

Nic Carter 6:21
right. So as a as a firm, like bixin, you’re miners, but you’re not trying to actually hedge your exposure and be market neutral, you are sort of directionally long on Bitcoin, generally.

Mustafa Yilham 6:37
Generally, we are Bitcoin denominated. But you know, as a miner, we still have operational costs, such as electricity, labor costs, etc. So, you know, obviously, we do have a risk department that constantly ensure, you know, we are hedged to certain degree, but largely speaking, yes, we are very Bitcoin dominated.

Nic Carter 7:02
So, let’s talk about mining for a little bit. This is an topic of endless fascination for me, I think a lot of traders are paying attention to mining, there’s been a huge amount of chatter recently about miners not being able to sell their coins. So that was the rumor, at least, which I think you helped dispel a little bit on social media.

I think the one big question that people ponder is, you know, what is the effect of miner behavior behavior on Bitcoin cycles? You know, because there’s this one theory that, you know, miners have a pro cyclical effect on Bitcoin in terms of, they sort of hoard the coins that they’re mining during bull phases. And then in bear markets, they are forced to liquidate a lot of their coins. And so that actually adds to the sell pressure and bear market. So it sort of intensifies the price action in both directions. Is that kind of consistent with your experience? I mean, that’s definitely the popular narrative around miners. Is that does that align with what you’ve seen?

Mustafa Yilham 8:11
Yes, most miners are like this. But I think it’s very important to note that it has nothing to do is the situation that’s going on in China right now, it has always been like this, and this for a very similar reason. Because, you know, for most miner, after they invested a lot in purchasing mining machine and setting up operation, they don’t have a lot of extra capital just sitting there to pay for electricity. So they need to sell their Bitcoin to cover that. Now, obviously, during a bull market, you can sell less to cover your cost. So you can hold more Bitcoin and during the bear market, you know, our experiences that electricity cost can be as high as as high as 90%. So for most miners, you know, during the bear market, you would have to sell more to cover your cost. So I think that statement hold true. But again, it I don’t see it have anything to do with what’s going on in the China ecosystem currently.

Nic Carter 9:11
Right, right. Yeah, I didn’t mean to imply they’re related. Would you say just, as far as attitudes go, I mean, the entrepreneurs that set up mining farms, are they doing it because they want to accumulate as much Bitcoin as possible? Or are they doing it because they see an arbitrage and they feel that they can get they can mined Bitcoin more cheaply than the sort of median Bitcoin is mined, and they just want to play that arbitrage and they don’t really care about the asset in the long term.

Mustafa Yilham 9:40
Um, I think that really depends on different miners from our experience in China. Most large scale miners are very firm believers into bitcoin take Bixin as an example the founder actually started mining Bitcoin, I believe in 2009. And since then, himself and the firm have been a very firm believer into bitcoin and we are Bitcoin denominated, and I think there are other miners that hold different view and constantly liquidate their portfolio. So I think it really varies.

Nic Carter 10:25
Yeah. Yeah, that’s fair. So part of your mandate in your role is actually finding suitable electricity for mining. And this is another topic, which really fascinates people, because there’s all this chatter, you know, about, like, you want to have a cold climate and you want cheap electricity, you want sort of geopolitical stability and so on. But I figured I would ask you, you know, what are the traits you look for? In a, an energy, you know, center, you know, when you’re scouting for a suitable place to mine? What are sort of the key considerations for you?

Mustafa Yilham 11:08
Yeah, so when we are looking at different market to source electricity, I think the most important thing to note is that we’re looking for electricity surplus or waste energy. And to give you an example, China has a lot of electricity surplus during summer months, especially in the Sichuan region, which produce a lot of hydro power during the rainy season. So the price of electricity is much cheaper compared to you know, rest of the world. In addition, we also consider costs such as like logistic cost and labor costs. And we have also been paying attention to overseas market and already made some significant investment in Central Asia. And during the due diligence process of mining, farm investment, there are a few key factors we look for, such as energy type, price, voltage, and capacity, and location, geolocation. The price of electricity normally is the most important crucial component in crypto mining. And the voltage, you know, oftentimes determines our potential cost for infrastructure investment. I think in addition, we also pay very close attention to other factors such as local regulation, policy, taxations, governmental support, we also want to pay close attention to reliability of the local energy company, our local partners background. So I think during this initial due diligence, and the sourcing process of electricity, there’s a lot of factors that we normally put in taking place.

Nic Carter 13:00
And so, I mean, your role basically involves scouring the globe and scouting out these locations. I mean, is that are you even during sort of COVID times, are you still sort of trotting around finding cheap electricity sources?

Mustafa Yilham 13:17
Yes, that is part of my role, because, you know, I spend like, like three to six months in Siberia, and this far east of Russia, for example, in end of 2018, and 2019, which was a very fascinating experience. And, but during the COVID time, our overseas expansion was kind of put in halt temporarily, just because labor and logistic are very difficult to arrange at this time.

Nic Carter 13:56
What are the most promising jurisdictions that I mean, you know, he don’t have to give up the full secret sauce, because I’m sure there’s some, some proprietary, you know, information as far as it pertains to your business, but what generally, you know, geographically, what are some interesting locations that you’ve discovered for mining purposes?

Mustafa Yilham 14:21
So I would say like, you know, when we look at a geolocation. So, you know, price, regulation, temperature are like the most important factors. I think Central Asia is great for mining outside of China, speaking in Central Asia is great. Russia, I think have huge potential. North America, I think has the probably most potential in next few years, for a few different reason. But I think those are generally the regions we look at when I sourced electricity?

Nic Carter 15:04
And so with North America, I mean, would it be because I know there is hydro here I actually visited an old aluminum smelting plant in in in Massena New York, which was powered by hydro which had been converted into bitcoin mine. So you know, I’ve certainly seen some of that firsthand what it what is it that makes you bullish on on North America as a potential venue for mining?

Mustafa Yilham 15:33
So, I think based on our conversation with different mining manufacturers, on average, right, like around 60%, of the mining machine sell in past two quarters or so have been outside of China, in recent months, and mostly actually in North America. And I think that there’s few factors that plays into why North America could be huge in mining in future. One of them is price. I think you’ll be surprised to hear that. In fact, the price right now in North America notice are cheaper than the average price in China. And in the past, we used to think, you know, US high labor costs, less mining ecosystem, and, but we can clearly feel that things are changing rapidly, who’s in past one to two years. And I think during the next cycle, you will see a much higher involvement from us and other country into mining. And I think the most important factor also for us miner, is that they have access to cheap capital cost, meaning, you know, they have the ability to go out there and, you know, basically borrow at a much cheaper rate than Chinese miners are able to.

Nic Carter 16:59
Is there an element of political stability that comes in I know, certain jurisdictions in the US, you know, kicked out foreign miners who said they didn’t even want Bitcoin mining to happen at all, but I guess there’s probably slightly less capriciousness in terms of, you know, local regulators changing their minds on mining, as compared with China. That’s sort of just me speculating. Does that political stability come into play at all for you?

Mustafa Yilham 17:30
Um, so I think for the next two to three years, I think you will see more local miners from US increase their hash rate, but I think the cross border geo relocation, we don’t see that happening quite a lot. Just because, at least under the current environment, like you said, there are a lot of uncertainty on political, economical, and overall macro side. And so I think you’ll see Chinese miners continue to grow in China, but a lot of the hash rate will also start to grow in other countries like Russia. And, you know, US and North America excetera.

Nic Carter 18:22
Have you I’m sure you’ve looked at this. Have you looked at the Cambridge center for alternative finance their dashboard on Bitcoin mining? location wise?

Mustafa Yilham 18:32
Yes. And I think most of you are looking at it in China, right?

Nic Carter 18:37
Yeah. Maybe I’ll pull it up right now. They we had Apolline Blandin on the show to talk about it. They partnered up with pools, and did some work on geolocation. I let me see if I can. Yeah, so right now China’s got 65% US 7%, Russia, 7%, Kazakhstan, 7%, Malaysia 4%, around three 3.8%? Do these numbers seem kind of reliable to you? No. You do see these numbers and think, yeah, this is sort of roughly, you know, consistent with my experience, or is it sort of wildly, wildly, you know, different in your experience?

Mustafa Yilham 19:25
Um, I think for now, it is consistent with our experience, but I think within next one or two years, those data will change drastically.

Nic Carter 19:38
What do you make of the kind of significant mining in Iran do does that strike you? Is the state subsidizing Bitcoin mining? I know the Iranian government has recently sort of indicated their desire to be more active with Bitcoin or have you you know, anecdotal Seen, you know, big mining operations kind of locating themselves in Iran?

Mustafa Yilham 20:05
Yeah. So this might come quite surprise to you. But I think even as a Chinese miner where we like, like Bixin, for example, I’m sure they are some miners who does not pay too much attention to, you know, OFAC and other sanction list. But yeah, as we have always avoided Iran, and we I mean, I haven’t even looked at the region or did any due diligence on that. Just because, you know, the, I think it has a Chinese miner, we do not want to, you know, just violate any OFAC regularly. That’s right.

Nic Carter 20:55
Yeah, that strikes me as a good idea. Yeah, I know. I, I, you don’t have to answer this if you don’t want to, but um, what would you say, you know, to someone who’s like thinking of getting into mining, what would you say would be a good electricity price for them to even be competitive in the market today? Would you say it’s sort of in the 5-6 cent per kilowatt hour range?

Mustafa Yilham 21:20
I think it depends on the scale you’re trying to go for. And the price of bitcoin? I think under I mean, right now, if you are you a retail customer, and you’re trying to go into bitcoin, I think it’s very difficult for a few reasons. Number one, you need to purchase mining machine, which I think both what’s Whatsminer and Bitmain are, are booked out until next year, April to June.

Nic Carter 21:49

Mustafa Yilham 21:49
You need to find mine like investment very large scale investment mining farm. build that out. I mean, that it requires a lot of capital, and it requires a lot of experience to run a mining operation properly. If you are just trying to purchase mining machine, and there is a way for you to purchase a you try to host I think maybe, you know, four to five cents. Five point five could be a competitive price. I think that on the current bitcoin price. And I think that that’s general price we seeing North America for hosting at the moment.

Nic Carter 22:29
Yeah, but so you wouldn’t encourage anyone listening to to get into mining as an individual as a as a profession

Mustafa Yilham 22:38
At this stage of mining cycle, probably wouldn’t.

Nic Carter 22:44
What does it tell you that the hardware from whatsminer in bitmain is sort of spoken for? I mean, that sort of implies that people are like everything about what a an asyik is, it’s like a physical instantiation of future Bitcoin rewards. So it’s kind of like people have bought these forwards or these these physically settled Bitcoin futures in hardware form. I mean, that strikes me is pretty bullish. What’s your interpretation of that?

Mustafa Yilham 23:13
I think, you know, a lot of the purchaser, like we discussed earlier for this round of purchasing are from outside of China. A lot of them are very large institution, some even publicly listed company in United States. I think where you previously worked out fidelity’s, one of the large minor in North America, alone side few others, for institution to mine Bitcoin. You know, I think that’s really due to the fact that for them, you’re right, it’s a very long option, and also, probably better option than to buy bitcoin directly.

Nic Carter 23:55
So there was a huge discussion point earlier this year, I’m sure you saw this hash rate dropped dramatically, a couple of months ago, and a lot of people were speculating that it was due to this seasonal migration, where I believe it’s, you know, the rainy season, this dry season, and the volume of water flowing through hydro in, you know, provinces like Sichuan declines. And so then maybe the miners base their migrate their hardware to other regions in China, with sort of non renewable sources of energy. That was certainly the speculation out here in the west to explain the hash power dynamics. Is that something you’ve noticed, I mean, are you aware of this, this seasonal migration? People talk about it, but, you know, is that something that they you know about?

Mustafa Yilham 24:51
Absolutely. seasonal migration, I think really depends on geolocation, but it does hold true for Chinese minor. So like for Bixin during the summer months in the rainy season, our operation are mostly based in Sichuan. You know, and during the winter, we migrate to Xinjiang and Inner Mongolia. We also have mining farm in Kazakhstan, where we deploy some of our mining machine. But in countries like Kazakhstan price are same all year round. So migration is not required within the border. But it definitely holds true for Chinese mining community.

Nic Carter 25:34
Do you think that actually explains the rate the really dramatic drop we saw in hash rate? Or, you know, is it could it just be normal variance?

Mustafa Yilham 25:44
Yeah, I think during I think during the past cycles, each year, during the miners are migrating during the rainy and dry season, you will see a drop in the hash rate. And I think it’s just normal because, you know, see, if you look at China is very huge. And, you know, most of them are going by train and so trying to sit down have quite a distance for them to do that. I’ll just take I set it up locally afterwards.

Nic Carter 26:16
Yeah, it is a long way. Yeah. Besides the country entirely.

Nic Carter 26:23
I’ve so I’m so so curious about mining. This is amazing. It’s amazing. All the information. There’s so many, like myths that were busting or confirming? You wouldn’t believe. I mean, I guess you would the chasm in understanding between kind of east and west. I guess one thing is, you know, you have these withdrawal issues that the major Chinese exchanges, you mentioned on Twitter that you didn’t think that was the cause of the Bitcoin rally. I certainly agree with that. I mean, I had the team at coin metrics, look at this. And they found that miners were able to liquidate their coins as normal. So I guess we can sort of put that one to rest. In your view, the withdrawal issues at various Chinese exchanges did not cause this current rally, correct?

Mustafa Yilham 27:16
Yeah, I think that statement is not true. That’s for several reasons, which, you know, I didn’t- I made that statement, but didn’t explain on the social media. So the reason why that statement is not true. First of all, when OkEx incident happened. Most miners that we know immediately that OkEx mining pool, and redirected their hash rate to other mining pools, such as f2pool or Huobi mining pool. So the notion that because of OkEx miner can sell their Bitcoin to pay for electricity does not exist, because everyone just simply switched their mining pool very quickly, especially to you know, f2pool where we saw a huge increase in hash rate in recent weeks. And I think that’s due to a growing concern among miners to exchange based mining pool after OkEx, incident. And second point, which can be a bit more sensitive topic is OTC trading in China. Right. And it is true that in recent months, China have been more strict on OTC for AML purposes. But it is not bad. It became a little difficult but not impossible. And nowadays, I think people are just being a much more careful with their OTC counterpart and taking extra steps to ensure that, you know, their source of fund is legitimate and their counterparts source of funds are legitimate.

Nic Carter 28:59
Okay, so on that same topic, so, our, our lovely friends over ripple here in this country. Keep saying that. This is crazy. They keep saying that China, the Chinese state somehow controls Bitcoin, due to the fact that you know, hash power is physically located there. Can we put this this myth to rest with what’s your perspective on this particular piece of FUD?

Mustafa Yilham 29:33
Sure. So I think we disagree with this statement. So although currently largest top mining pools are based in China, but you can see that from OkEx mining for instance, we discussed earlier, miners are not loyal to certain mining pool. Once you see a regulatory price or other action that they disagree with. They will switch mining pool very quickly. And if any of the mining police trying to harm the ecosystem, I think mining community will also switch right away. And also for most of the large scale miners and mining pools in China, these do hold significant amount of Bitcoin. And I think it is against your interest to do anything that can be potentially harmful to the ecosystem. And you know, as we see, start to see more mining operation from North America, we will also start to see more US based mining pool.

Mustafa Yilham 30:34
Bitcoin mining, I think over the next one to two years will be more decentralized compared to any of the previous years where mining became a large operation in China. And lastly, I think, is important to note that over 18.5 million Bitcoin have already been mined. And there are less than three, that have yet to be mined is going to take a very, very long time to mine that right. So the impact of miners on price action, I think, is definitely decreasing. And lastly, if you look at just Coinbase and Grayscale, alone, they probably custody more bitcoins in the entire Bitcoin holding of Greater China region. And by the way, there are also other players like you know, Fidelity which you’re very familiar with, and all of them are US based firms. So I think overall speaking, I think United States have, you know, the most power when it comes to Bitcoin, not China.

Nic Carter 31:37
That’s an amazing answer. I think I’m just gonna take that clip and post it whenever ripple has their terrible articles about China.

Mustafa Yilham 31:51
Thank you, thank you.

Nic Carter 31:52
I mean, that’s the most thorough rebuttal of this notion that I’ve ever heard in my life. I mean, I think you’re absolutely right. I think you’re absolutely right. I think people don’t understand that miners are pro Bitcoin, they don’t just treat it as a trade or a way to make money through arbitrage. I mean, Bixin, great example. You guys are directionally long Bitcoin as an institution, you make investments to support Bitcoin, you run a very popular bitcoin wallet. So it’s, it’s about more than just making money. I mean, it’s about supporting the phenomenon. So you wouldn’t want to do anything that would actually harm it.

Mustafa Yilham 32:30
Yeah, absolutely. And like, even speaking from custody perspective, right, again, like I think us institution hold a lot more bitcoins in China.

Nic Carter 32:40
That’s true. And we do need to be wary of those institutions as well. I mean, that was the whole point behind the two acts, debate back in 2017, as I’m sure you remember, I mean, that we’re talking about largely US based institutions that tried to force through a protocol change, and they were defeated. So I think the point is that no matter what your influences, whether you’re a minor, or you are a large, US based custodian, if you try and change the protocol in a way that the user is disagree with, you’re not going to succeed. Yes. So that’s something that I think outsiders don’t often understand about Bitcoin is the users, the people that run the software come first. And, you know, the service providers have their part to play for sure. But they’re not sort of fully sovereign, they don’t have full discretion over the future of the protocol.

Mustafa Yilham 33:37
Yeah, I definitely, definitely agree with that statement.

Nic Carter 33:41
So on that same topic, there, we have an interesting development. We are potentially looking towards our first new protocol upgrade in three years time with taproot and schnorr. And I’m torn. I’m not gonna ask you to explain taproot, I probably couldn’t explain it either. But we are seeing this interesting thing where certain miners are signaling their support for implementing top road. What is the what’s the view of Bixin? On this upgrade? Do you plan to support it?

Mustafa Yilham 34:16
Yes. And I think both currently, like few large mining pools, such as no Poolin, and F2Pool have all expressed support for the taproot upgrade. And as an institutional minor Bixin also signal support for taproot. Technically speaking, we think it improves your Bitcoin privacy, scalability and flexibility on the smart contract.

Nic Carter 34:42
I love to hear it. That’s absolute music to my ears. Thank you.

Mustafa Yilham 34:46
And I really want to add on what you have said earlier, I think when it comes to political upgrades, people really don’t realize that minors tend to listen to the voice of you know, community and the market and what’s best for Bitcoin development and I think that have hold true again and again in past political upgrade attempts, like you know BCH and Bitcoin, Bixin spent a lot of money to, you know, fight against that, that I’d like to support Bitcoin during during that time. And I think the power is really on the hand of the market and community, not Bitcoin miner or service providers.

Nic Carter 35:35
Wow. I think this is the most bullish interview I’ve ever done on the show. I mean, it’s just I’ve never heard it put so clearly, you know, directly from some of the represents a large minor to this is this is really regulatory. I’m very excited that the you guys are going to support Taproot. I think, you know, a lot of developers here are nervous, you know, about how exactly, we’re going to activate it. And whether we’re going to get, you know, like in 20 1617, the miners kind of blocked segwit or, you know, a subset of miners were blocking it. And so everyone’s very nervous about it. But I think, you know, since the Bitcoin cash factions split off, it’s, it’s less likely that we get anything any conflict. And any I haven’t seen any opposition, to Taproot, at least, yes, far. So hopefully, hopefully you push it through.

So before we wrap up, you know, you’re telling me you spent a lot of time in Turkey, which a lot of bitcoiners are paying attention to these days. Apparently, there’s a thriving local exchange environment there with I think BTC Turk is the biggest. They’re obviously having a currency crisis with the lira right now. Tell me about your experiences there. And why Bitcoin is kind of popular there. What what factors correlate with sort of local enthusiasm for Bitcoin?

Mustafa Yilham 37:09
Sure. Um, so I think, you know, people are definitely very excited about crypto in Turkey. And overall trading volume grows several times this year compared to last year. And I think, a few factor on why we should pay very close attention to emerging markets such as Turkey. Number one, Turkey have a very relatively young population compared to its neighboring countries in Europe or Asia. Overall, I believe 46% of the population on a smartphone device in Turkey, 17% of the population are bilingual in both English and Turkish, Turkish Government remain neutral toward cryptocurrency. I think it’s largely currently still all regulated. And, you know, last year, I hosted a dinner in Turkey that was sponsored by Turkish presidents Investment Office. And so, and like our macro level, speaking, Turkish Lira, is currently near an all time, you know, low and political and economical instability, really further enhanced adoption. I think most importantly, there’s no tax, I believe, for capital gain of crypto in Turkey. And, and, lastly, if you visit, if you have a chance to visit this temple, you will see that there are as many as foreign exchange shop and gold shops as McDonald’s in the States. This is Turkey. So I think people are already very used to this, you know, trading foreign exchange, commodity trading. And that was an easy migration to Bitcoin, I believe.

Nic Carter 38:56
Yeah, it’s so interesting. I mean, we hear this a lot about the jurisdictions where Bitcoin is popular with retail. Oftentimes, it’s places where there’s a cultural affinity for gold as a savings device for households. And it’s clearly the case in Turkey. not really the case in the US at all. Although we you know, there’s a lot of American gold bugs and, you know, American institutions that was solid gold, but it’s not really common to have your household gold as your savings, which I think is part of the reason Americans don’t understand Bitcoin as much because they’re not used to trying to store value outside of the financial system. But in places like Turkey, people are used to that and so Bitcoin kind of comes naturally to them.

Mustafa Yilham 39:44
Yes. And, you know, to tell you like a personal story, not personally, I grew up in west part of China and Central Asia. I speak fluent Uzbek language, and saw firsthand as I was growing up in Central Asia How elders in my family or in the region’s are so attracted to gold, right. And I think mostly for two reason, one to fight against currencies inflation and volatility. But number two, I think just more resistant toward you know, governmental seizure, especially in CIS, Central, a lot of Central Asia region. And unlike cash, you can also pass it on to different generation within your family. So people are very accustomed to that gold purchasing silver purchasing culture. Now, you have an entire US population growing up in that region, comparing gold to Bitcoin. And, you know, what do you think will happen? I think people really underestimate the adoption of cryptocurrency in emerging market. For some people in certain jurisdiction and situation, I think involvement in Bitcoin is the only way to fight back and voice their opinion. And, wow, yeah, and and, you know, like, keep in mind globally, there are 1.7 billion adults that are remain unbanked. But two thirds of them have access to smartphone that could help them access to financial services. So I think the, you know, the potential is really, really huge.

Nic Carter 44:30
Yeah the post-Soviet states are really so interesting to me as potential breeding grounds for Bitcoin adoption because there will be that collective cultural memory of bitcoin adoption; I mean you had really serious episodes of inflation in the ruble after the Soviet Union collapsed. So, that looms large in the memory – that wasn’t too long ago, that was in the 90s. It’s the same reason that Argentines have an affinity for Bitcoin, they remember currency failure, they’ve lived through it. So it does strike me as quite reasonable that there would be more enthusiasm for Bitcoin in these places.

Mustafa Yilham 45:40
Absolutely, you’re right. And I think especially post USSR, people started to collect a lot more commodities, and for a younger generation, people really started to transfer to Bitcoin.

Nic Carter 45:39
Well, Mustafa, this has been such an edifying conversation, we busted so many myths today, we learned so much about actual miner attitudes to Bitcoin as opposed to just speculating as to what miners think. I went on your show – I went on the Bixin super app and did a session which was translated into Mandarin in real-time, which was really fun, and people were gifting me red envelopes in real time when I was doing that. Unfortunately we have no red envelopes that our listeners can give you. But certainly, you’re doing us a favor by helping elucidate miner attitudes. I want to thank you for coming on. How can people follow you?

Mustafa Yilham 46:45
First of all Nic, really appreciate you inviting me to join your show. It was a huge pleasure for me to join this show and we were very happy that you had the chance to come to Bixin to join the show. We really follow a lot of your research closely at Bixin and its fascinating to see the contribution you’re making to the space. If you want to follow Bixin outside of China, Twitter is the best way, my DM is always open.

Nic Carter 47:20
Ok well Mustafa this has been so fun, hopefully we can have you on again in a year’s time, we can see where hash power went, we can see whether your forecast came true. Thanks so much for coming on.