Shark Tank’s Kevin O’Leary Explains His Crypto Strategy With Bitcoin, Ethereum, and Bitzero

Once a vocal crypto skeptic, high-profile investor Kevin O’Leary has gone all-in on the industry. The prominent “Shark Tank” star is now a key investor in Bitzero, an energy infrastructure company focused on Bitcoin mining.

In a podcast with BeInCrypto, O’Leary stated that the crypto cycle is here to stay. He confirmed that he invests in four specific areas: Bitcoin, Ethereum, stablecoins, and the mining industry. Meanwhile, Bitzero President Mohammed Bakhashwain explained why clean energy is the key to successful Bitcoin mining.

Mr. Wonderful’s Great Reversal

Kevin O’Leary’s transformative stance on crypto exemplifies the experience of many investors who have leapt from traditional finance to the digital assets sector. 

In an interview with CNBC six years ago, “Mr. Wonderful” used adjectives like “worthless” and “garbage” to describe Bitcoin. Now, his portfolio is filled with cryptocurrency investments. 

“I also own tokens. I have a whole research team that works on this now. If I want exposure to crypto, I only need three positions now – I used to have 27. But if you statistically look at the volatility of just Bitcoin and Ethereum and a stablecoin for liquidity… That’s all I need to own,” O’Leary told BeInCrypto. 

The Shark Tank investor added that his earlier hesitation to invest in the crypto sector was due to its lack of regulatory clarity.

“You have to remember, back at that time, the regulator was not on board. It was a hostile regulatory environment in every geography, not just the United States,” he said, adding, “I didn’t have any choice but to take a stance in alignment with regulators. When things started to change, notably in Switzerland and Canada, where they brought the first ETF for Bitcoin, then I also changed.” 

O’Leary has come a long way since then. He explained why Bitcoin and Ethereum are the only digital assets besides stablecoins he is betting on.

The Bitcoin vs. Ethereum Debate

While O’Leary has a fixed allocation of 2.5% in Bitcoin and Ethereum, he and Bakhashwain discussed their differing roles in a portfolio. 

Bakhashwain emphasized Bitcoin’s utility as a hedge against inflation. For him, its simplicity and fixed supply make it the ideal asset for treasury departments looking for a secure place to store value.

“I like to look at Bitcoin like gold. You might have a narrower upside that you can clearly see, but you are, as Kevin calls it, you are investing in the ‘granddaddy.’ So that’s why you’ll have a narrower upside,” he said.

On the other hand, O’Leary is more intrigued by Ethereum’s potential for growth. He sees it as a currency and the foundational technology for a new financial system. 

“Why is Ethereum surging? Because most investors now realize that it’s how Wall Street’s going on chain… The minute the Genius Act was passed and stablecoins became legal, where are most of those transactions occurring? On chain, on Ethereum,” he said.

He added that Ethereum offers a sophisticated strategy that allows investors to get the best of both worlds.

“The [reason] that got me into Ethereum was simply, I can stake it, I can wrap it around my Bitcoin, and I can get yield,” O’Leary told BeInCrypto. 

But for him, simply owning tokens is not enough. His broader philosophy focuses on owning the essential infrastructure.

Beyond Tokens: Investing in the Infrastructure

For O’Leary, a successful investment strategy means owning the essential infrastructure that powers the Bitcoin industry, a concept he calls his “picks and shovels” theory.

“If I had to start investing in gold 300 years ago, I would have invested in gold, gold miners, companies that made jeans, picks, and shovels. And I would have done much better than just owning gold. So the reason I own Bitzero is they mine Bitcoin and they’re actually a power company,” he told BeInCrypto.

Bitcoin mining is a power-intensive process, and a company’s ability to secure cheap, reliable energy is its single greatest competitive advantage. This concept sets the foundation of Bitzero’s business model.

“I have never found a company that has a lower-cost power than Bitzero. That’s what this is all about. Bitcoin mining is about power… If you don’t have low-cost power, you may not make any money mining,” O’Leary said.

While many Bitcoin miners use expensive or inconsistent energy sources, Bitzero’s strategy involves operating where clean, low-cost power is abundant. The company’s focus on fundamentals, like energy, permits, and infrastructure, creates a sustainable business model. 

This approach also makes the company less vulnerable to the frequent, volatile swings of the cryptocurrency market.

Avoiding the US’s Gridlock

Bakhashwain explained that the company’s strategy is to secure power in locations with a surplus of clean energy, such as Norway and Finland, where they can acquire it for a fraction of the cost of other miners. 

This approach also helps the company avoid the regulatory and logistical challenges of mining in the US, where different states have varying and often complex policies regarding power and permits.

O’Leary agreed with this last point. He argued that hooking up to the power grid in many states can cause significant rate increases for residents, leading to pushback from municipal authorities. 

“Everybody else in this space– they have no power. Everybody’s struggling to find power on the grid in the US and North America, and they’re paying a lot for it,” he said.

Bitzero’s operations, particularly in Norway, use surplus hydroelectric power that would otherwise go to waste. This keeps power costs low and provides a revenue stream for local municipalities without increasing residents’ costs. It also helps counter greenwashing accusations.

“The power price for the domestic use remains the same and the local communities are [actually] benefiting, the municipalities making revenue out of our consumption, which helps them to invest more in their communities,” Bakhashwain stated.

This commitment to a solid business model also explains O’Leary’s powerful warning against excessive leverage.

A Warning to the Crypto Industry

O’Leary offered a powerful warning for the entire crypto industry: avoid excessive leverage. 

He believed that recent market downturns were not the tokens’ fault. Instead, he attributed the failures of numerous companies to their very poor financial management. He sees a similar “rookie mistake” in the crypto space where companies take on massive debt.  

He, by contrast, limits the leverage on all his assets. 

“Anybody with a 60% leverage ends up having to sell equity at some point to stay liquid. I live off a ratio of more like 30% leverage so that I never get in a situation where if the underlying interest rates or the price of real estate drops 50%, I’m wiped out,” O’Leary said. 

His strategy is to prioritize long-term endurance over short-term gains, allowing him to capitalize on the failures of over-leveraged competitors.

“It’s important for me that people do stupid deals, because that’s where I buy my assets from.  I’m the guy that waits for the idiot manager to blow up with too much leverage,”

This patient strategy allows him to be a “predator,” ready to scoop up assets from those who have overextended themselves. For him, an investor’s most powerful long-term assets are a stable business model and a cautious approach to risk.