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As Bitcoin mining firms grapple with the aftermath of April’s halving event, many are re-evaluating their business strategies to remain viable in a rapidly changing market, pushing miners to explore new revenue streams, particularly in artificial intelligence (AI) and high-performance computing (HPC).
BTC is outperforming the shares of companies that retain tokens they mint, and the top performers are investing in AI data centre development.
The industry's division has been more intense since the the most recent Bitcoin halving in April. The predetermined event lowers the Bitcoin reward—miners' primary source of income—by 50% every four years or so. The event aims to maintain the hard ceiling of 21 million Bitcoin and prevent inflation.
Modern pioneers require a lot of energy, processing power, and data storage space instead of pickaxes, shovels, and pans. AI's enormous energy demand is rapidly increasing, and businesses urgently need it. As mining margins plummet to all-time lows, Bitcoin miners have begun combining into fewer, bigger businesses. Nonetheless, the miners often have reliable energy sources.
Just yesterday, Northern Data Group, majority-owned by stablecoin giant Tether, announced that it is considering the sale of its Bitcoin mining business, Peak Mining. This move aims to accelerate its AI solutions business by using the proceeds to acquire data centers and AI-centric GPUs.
The firm’s COO, Rosanne Kincaid-Smith, emphasized the goal of creating a comprehensive AI ecosystem: "Our goal is to provide a seamless AI ecosystem where customers can access intelligent, sustainable solutions that enable their businesses to harness AI's full potential; and provide the tools they need to make the breakthroughs that have the potential to change the course of history. As a business we are excited about the progress in the AI landscape, its impact across industries and our role in driving that progress."
The pivot towards AI isn’t isolated. Other mining firms are also seeking to diversify. Companies like Core Scientific and Iren, formerly Iris Energy, are investing in AI and HPC capabilities to utilize their excess capacity. As the energy requirements for AI continue to surge—projected to increase 160% by 2030 according to Goldman Sachs—these miners are well-positioned to benefit from their existing infrastructure.
Despite the ongoing transitions, the mining landscape is becoming more competitive. Following the halving, many miners have formed larger entities to consolidate resources, aiming to maintain profitability as Bitcoin mining margins reach historic lows. Publicly traded miners like Riot Platforms, CleanSpark, and Marathon Digital Holdings (MARA) have opted to retain the Bitcoin they mine, hoping for a price rebound. However, their stock prices reflect the current uncertainty, with MARA and Riot – two of the biggest publicly listed Bitcoin miners and both HODLers – down 20% and 36%, respectively, this year.
Interestingly, the recent uptick in Bitcoin’s hashrate—now reaching record levels—has sparked renewed interest in mining stocks. As of now, the hashrate has surged to an all-time high of 840 exahash per second. This increase indicates greater competition among miners, with the cost of extraction rising, further squeezing margins. The greater the hashrate, the fewer rewards miners receive, compounding the financial challenges for those without access to low-cost energy.
In contrast, companies that invest more heavily in AI are witnessing stronger stock performance. For instance, after striking multibillion-dollar partnerships with AI startup CoreWeave, Core Scientific's shares have nearly tripled since emerging from bankruptcy earlier this year. The miner plans to upgrade a few of its data centres to include graphics processing units to provide high-performance computing power for AI applications.
Meanwhile, TeraWulf, a smaller player focused on AI data center expansion, has seen its stock price quadruple. The stock prices of Bitcoin miners like Iris Energy and Bit Digital, who invest more in AI, typically rise above those of some of their competitors, who are increasing their holdings of the cryptocurrency they mine.
After experiencing a business collapse in recent years, miners who hold Bitcoin have improved their ability to predict the cycles of the cryptocurrency market. Meanwhile, well-known hyperscalers and cloud providers like Equinix, the leader in data centres, and Hewlett Packard Enterprise are now competing with Bitcoin miners.
Hyperscalers, including Amazon Web Services, Alphabet's Google Cloud Platform, Microsoft Azure, IBM Cloud, and Oracle, are large-scale cloud providers with several data centres worldwide and enormous processing capacity. Although cloud providers can offer more individualised services, hyperscalers and cloud providers offer comparable services.
However, miners have a significant cost and speed advantage due to their access to readily accessible, frequently inexpensive energy.
While the broader industry grapples with the implications of the halving and competitive dynamics, the growing interest in AI offers a potential lifeline for miners. This trend reflects a fundamental shift in the cryptocurrency landscape, where success may increasingly hinge on the ability to adapt and innovate.
As Northern Data and others pivot to AI, the next few months will be critical for the industry. The interplay between Bitcoin’s market performance, the evolving hashrate dynamics, and the integration of AI will shape the future of mining operations. With miners looking to optimize their assets, the potential for a bull market could hinge on their strategic decisions in the coming months.
Elsewhere
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Blockcast
This week's Blockcast features Moongate co-founder Peter Hui, who tells us how to plan the perfect Web3 event and why NFT ticketing could revolutionize the industry
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Events
Singapore Fintech Festival (Singapore 6-8 November 2024)
As 2025 approaches, financial leaders face the challenge of navigating a landscape transformed by AI, data, and digital platforms that are rewriting the rules of global trade, commerce and financial services.
At the Singapore FinTech Festival 2024, hear from global leaders at Microsoft, Goldman Sachs, PayPal, and Tencent, and more, as they share the strategies shaping the future of finance.With 66,000+ participants from 150 countries and 10,000+ organisations, everyone who's anyone is here.
Click to see who’s attending and who you can network with at #SFF2024! Blockhead is proud to offer a 20% discount on tickets via this link.
GeckoCon (Bangkok, 11 November 2024)
GeckoCon returns, and this year we're diving into the revolutionary world of Web3 Gaming! Discover how the fusion of blockchain and traditional gaming is creating a whole new entertainment layer.Don't miss out—visit CoinGecko now to secure your spot in our first ever Hybrid Conference set to take place in Bangkok, Thailand. Or from the comforts of your home!
Get your tickets now with Blockhead's 40% code: BHGC24
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[Redacted] (Bangkok, 9-11 November 2024)
The [REDACTED] conference is bringing together the brightest minds in technology for a transformative three-day event from November 9-11, 2024, at the Avani Riverside hotel. This gathering will take place just ahead of Devcon and promises to be a pivotal moment for the convergence of artificial intelligence and Web3.
Interested readers can apply for free tickets here, and sign up for the hackathon here.
Devcon (Bangkok, 12-15 November 2024)
Following Devcon Bogota in 2022, the Ethereum Foundation is set to host Devcon SEA, the 7th edition of its premier developer and community conference.
This landmark event is expected to bring together a diverse group of individuals, including developers, researchers, academics, and community members, to explore the future of Ethereum and its potential to reshape society.
Tickets are available here, with discounts for local builders, students and teachers, and youth.
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