More signs are showing of Bitcoin miners liquidating their holdings. Miners are already skilled in building their farms worldwide – just in time for the AI revolution.
Projects like Core Scientific have been branching into AI for the past few years without abandoning mining. Now, after a 12-year deal with CoreWeave, Core Scientific is accelerating its AI services. Core Scientific is renting out GPUs to train AI models.
Read: AI Training Methods Evolve Amid Controversies
The AI training industry is still nascent, with a size under $3B in 2024. In the next decade, the sector is predicted to grow by a factor of 10. While BTC and crypto are also viewed with a long-term eye, the AI gains promise a similar source of rapid expansion.
Miners are the ideal carriers of AI since they took years to secure cheap electricity sources. The pivot to AI is still expensive, but it may replace a drive to boost hashrate for mining. Some mining companies started setting aside a share of their facilities for AI services even during the 2022 bear market.
Bitcoin miners accelerate AI investments
Miners were relatively profitable until the halving. However, competition keeps rising, increasing mining difficulty. Mining machines are often priced according to surge demand, meaning miners with older farms must catch up. Some miners may use their accrued coins to finance a new foray into AI farms, securing high-grade graphic cards for generative content.
Some mining companies have tapped external financing, as in the case of Hut 8 (HUT).
The thirst for power by artificial intelligence (AI) firms is unrelenting, and bitcoin (BTC) miners are cashing in. #Bitcoin miner Hut 8 (HUT) shares outperformed most peers on Monday after the Miami-based company received a $150 million investment from Coatue Management to build…
— Dr Martin Hiesboeck (@MHiesboeck) June 24, 2024
Hut 8 has secured $204M in two funding rounds, and has been public since 2016. Hut 8, however, does not work as an independent miner, and has joined Foundry, one of the leading US-based pools.
AI will not directly affect Bitcoin mining, which requires specialized ASIC. The existing pools continue to mine profitably at this stage of the market, but still build a share of AI facilities. BitDigital is one of those pools with an early pivot and ongoing BTC operations.
$BTBT's cost to mine #Bitcoin (1Q 2024): 🟢 Electricity cost per BTC mined: $19,692🟢 Electricity cost + Other Hosting costs: $21,236🟢 Electricity cost + Other Hosting costs + Profit Sharing fees : $31,617
— Bit Digital, Inc. NASDAQ:BTBT (@BitDigital_BTBT) June 10, 2024
In the past years, mining companies have already experienced a wave of problems and a capitulation when BTC prices dipped as low as $16,000. Despite this, mining shifted to US-based facilities, lifting Foundry as the leading pool. Currently, Foundry controls enough hashrate to discover more than 28% of blocks. The energy for the hashrate may divert to AI facilities.
Some Ethereum miners may still have an early mover advantage, offering GPU for AI model training. In the end, the ability to source GPU and industry contacts, as well as the available energy contracts, may help miners accelerate their AI adoption.
Ethereum miners had a lot of expertise sourcing and operating large volumes of GPU based machines. This is an easier pivot than Bitcoin to AI. Their expertise can be absorbed by BTC miners that negotiated cheap long-term power contracts.
— Wayne Vaughan (@WayneVaughan) June 24, 2024
Skeptics also see AI as an expensive bet that may not pan out as expected. Yet, in that case, miners will still get paid for their facilities without being exposed to the fluctuations of the crypto market.
Despite the BTC price slide, miners are also not showing signs of winding down their operations, at least in the short term. Mining difficulty is still favorable after a drop in May, and the hashrate has only fallen slightly.
Bitcoin miners try to stretch their reserves
Miner reserves are at a 14-year low, at around 1.8M coins based on CryptoQuant estimates. Since the start of 2024, the market has absorbed an estimated 50K BTC from mining operations, with some of the coins sold near the market peak.
Also read: Bitcoin mining and renewable energy: A green revolution in the making
Even at the current rates, miners have significant reserves, some of which may allow them to expand into AI. The pressure to change their main source of revenues was the Halving event of BTC when most miners saw their daily earnings slide significantly.
Daily miner revenues have dropped by 79% since the #Bitcoin halving in April. This is forcing the miners to sell their BTC reserves and shore-up cash. This selling pressure may persist until we get some positive news from the U.S. Fed on potential interest rate cuts plus an… pic.twitter.com/BMQdGyDdho
— Disruptvestor (@disruptvestor) June 24, 2024
In June alone, miners have sold another $2M worth of coins. Some analysts suggest that funds are needed to continue operations, but this time, not all funds will go to mining more BTC when AI promises more significant revenues. The shift to AI, if successful, can help miners secure their positions more, as they do not rely on a single industry.
In the short term, miner selling pressure may dampen the market. Yet miner coins are still finite and cannot be raised as easily once the supply is used up.
Cryptopolitan reporting by Hristina Vasileva