Bitcoin miners are increasingly foraying into businesses that could utilize their existing mining infrastructure, generate more revenue streams, and reduce dependency on Bitcoin price.
Also Read: BTC miners offload $2 billion in Bitcoin, holdings at 14-year low
While diversification is a good idea, AI infrastructure can be particularly expensive due to its advanced technological needs. Miners’ profitability can take a hit with the massive capital outlay when Bitcoin price weakness and April halving have already created a double whammy for the players.
Bitcoin will safeguard the wealth generated by AI
In a recent interview with CNBC, Anthony Pompliano, a crypto influencer and founder of Pomp Investments, predicted the future trend of Bitcoin and AI. He believes that Bitcoin volatility emerges in a bull run as investors book profits in a rally. Citing the current market weakness, Pompliano opined that the volatility levels are within the expected range.
Also Read: Bitcoin miners continue to struggle, and a major sell-off might be imminent
Meanwhile, AI continues to be the focus of the digital sector. As per Pompliano, AI will generate wealth in the next decade with Bitcoin safeguarding it.
He noted, “We’re going into this automated world where AI is going to create enormous amounts of wealth, and Bitcoin is going to protect that wealth. And so when you start to see these technologies coming together, an easy way to see that intersection is, what money are the machines going to use?”
That said, Bitcoin miners may or may not be very lucky by combining the two digital categories. According to a previous report, a decline in BTC mining profitability after the April halving has led to miners finding alternative revenue streams. AI has been the most sought-after sector for businesses.
Core Scientific signed a 12-year deal with cloud provider CoreWeave with the expectation of over $3.5 million in revenue. As a result, the mining company’s shares reportedly surged. Nvidia-backed CoreWeave was the next in line to incorporate AI business. CNBC cited Needham analysts who explained that AI setups are far more expensive than mining farms.
Hold for it. The worst case scenario: miners shutting down as the pivot to AI fails miserably and $BTC price is below profitable. Expect more blood 🩸 pic.twitter.com/81BGF6Ke7C
— Dr Martin Hiesboeck (@MHiesboeck) June 25, 2024
Considering AI requires High-performance computing (HPC) data centers, rack spaces in energy-abundant areas that can accommodate this infrastructure have risen in value. As firms will see returns up over time, the capital expenditure has been weighing at the start of the operations.
Based on the report, mining firms like Bit Digital managed to derive 27% of their revenue from AI. In addition, Hut 8 and Hive generated 6% and 4% of their sales from AI, respectively. On June 24, Hut 8 announced that it is building an AI platform and aims to grow its data center portfolio.
Bitcoin mining profitability has reduced
Bitcoin mining profitability took a hit in April 2024. BitInfoChart data provide that from 0.175 USD/Day for 1 THash/s on April 20, it has reduced to 0.043 at press time.
Bitcoin mining profitability | Source: BitInfoCharts
According to Darren Franceschini, co-founder of Fideum (previously Blockbank), the reduction of mining rewards in half directly impacts income while operational costs like electricity and hardware maintenance remain constant or may even rise.
Also Read: Bitcoin miners may foray into AI training farms without abandoning mining
Franceschini notes, “I anticipate that the hash rate will continue to rise, potentially pressuring smaller miners to significantly expand their operations or risk being squeezed out of the market. The larger entities in the sector are well aware of the halving’s implications and are prepared to scale up their facilities accordingly. It still puzzles me how new mining companies entering the market can expect to achieve profitability, given the stark economic realities. I would foresee that many of these nascent projects seeking funding to establish operations will increasingly be viewed as non-viable investments, thereby solidifying the market position of existing players.”
At the time of writing, the Bitcoin hash rate stands at 611.4 Ehash/s, a rise of almost 23% over 24 hours.
Cryptopolitan reporting by Shraddha Sharma
