Crypto Miners Eye AI Amid Bitcoin Halving Challenges

CoinShares (CS) released a report last Friday suggesting that cryptocurrency miners might increasingly pivot towards artificial intelligence (AI) in energy-secure locations following the recent Bitcoin (BTC) halving. This strategic shift is being considered due to the potential for higher revenue generation outside traditional mining. The halving event, which occurs every four years, reduces the bitcoin supply growth rate by 50%, effectively doubling the production costs for miners.

Companies like BitDigital (BTBT), Hive (HIVE), and Hut 8 (HUT) are already exploring revenue streams from AI, while TeraWulf (WULF) and Core Scientific (CORZ) either have ongoing AI operations or are planning expansions in this area. According to James Butterfill and his team, this trend could lead miners to utilize stranded energy sites for bitcoin mining and stable, secure locations for AI development, balancing their investment portfolio across different technologies.

The report highlighted the financial strains placed on miners by the halving, with substantial increases in electricity and overall production costs. For example, the weighted average cash cost of production, which was approximately $29,500 per bitcoin in Q4, is expected to surge to about $53,000 post-halving. Similarly, the average electricity cost per bitcoin is predicted to rise from $16,300 to around $34,900.

In response to these rising costs, mining companies are advised to optimize energy expenses, enhance mining efficiency, and invest in cost-effective mining hardware. Additionally, the hashrate, which is a measure of the total computational power used to mine and process transactions on Bitcoin’s blockchain, is expected to reach 700 exahash by 2025. However, it might see an immediate post-halving decline of about 10% as miners deactivate less profitable machines.

CoinShares also noted that in light of these challenges, mining companies are actively managing their financial liabilities, with some using their excess cash to reduce debt. This financial prudence is essential as the industry adjusts to the new economic realities post-halving.