Blockchain
Bitcoin Mining Is Back (Only Now It’s AI)
Bitcoin is up 7% in the last five days. Do you know what that means? Bitcoin mining is back (until the price of Bitcoin drops 5% again in a five-day period, after which to be like this again).
As Bitcoin’s price surged, the stock prices of four of the five largest publicly traded mining companies (measured by total hashrate, or the computing power used to secure the Bitcoin network) rose by double-digit percentage points.
The sole laggard, Iris Energy Ltd (IREN), the fifth-largest of this quintet, is down 15% following a report released last week by Culper Research where the firm disclosed a short position in IREN. The reason Culper is making a bearish bet: the researchers say Iris’ Childress, Texas, site is unsuitable for artificial intelligence (AI) or high-performance computing (HPC).
(Perhaps if the price of bitcoin continues to rise, the unsuitability of IREN’s sites for revenue-generating activities other than bitcoin mining could fade into the background, as the company shifts resources back to bitcoin mining.)
In any case, what “bitcoin mining is back” really means is “bitcoin mining stocks they’re back,” because on a purely “are there more miners now?” basis, known pool hashrate has increased only slightly over the last five days (from 663,618 exahashes per second to 668,659 Eh/s) rather than increasing by 7% as one might expect. (Note: There is no “perfect” data point for hashrate.) Of course, the fact that hashrate does not react immediately and proportionally to the increase in the price of bitcoin is good for listed companies.
But then, if you look at the narrative around bitcoin mining and see what mining companies are saying, either in interviews or in public documents, you find that while they are still focused on bitcoin mining, there is a lot of talk about other seemingly unrelated or only marginally related things.
Last week I wrote about how both Artificial Intelligence and Bitcoin consume a lot of energy And not only that, it seems like it’s easy to adapt Bitcoin mining rigs to the next big thing: artificial intelligence (or HPC, if you want to avoid the backlash to the AI hype).
Investors like this adaptability. By Will Canny and Aoyon Ashraf of CoinDesk“Private equity (PE) firms are finally seeing value in bitcoin (BTC) miners, driven by growing demand for data centers that can power artificial intelligence (AI) machines.”
JPMorgan Research suggests the same thing and, funny enough, the investment bank’s research says that IREN (the company Culper deems “not ready for AI”) is best positioned to benefit from this asset-shifting trend.
Will Foxley, co-founder of Blockspace Media and host of The Mining Pod, expressed skepticism about claims that Bitcoin mining facilities are suited to supporting AI-based computing.
“A lot of these bitcoin miners are just talking about how they can use AI when in reality they can’t do that,” Foxley told CoinDesk.
I’ve argued this before going to the stock market is stupid. One reason is that it requires a company to shift from a mindset focused on short-term quarterly earnings, when long-term goals (like perpetual growth or surviving the next decade) should be the focus. It also makes it so that if a company is struggling, everyone knows about it, which can leave a company vulnerable.
In 2022, mining companies were in trouble. Core Scientific (CORZ) even filed for bankruptcyAnd all this was before Bitcoin. halving in April 2024 took a serious toll on miners’ revenue prospects. It was tough on miners in general, and since there are a lot of public mining companies, competitors could pinpoint exactly who was struggling. Riot Platforms (RIOT) tried to capitalize on this situation and made a takeover bid for a smaller mining company, Bitfarms (BITF). Since BITF is public, RIOT didn’t need to call BITF management and ask politely. Instead, RIOT bought a lot of BITF shares in a hostile takeover attempt. This might have worked out well if RIOT was right in assuming that it operated better and more efficiently than BITF, but we’ll never know since the takeover attempt ultimately failed.
There are other financial tricks out there that can boost shareholder returns (or kill them if they don’t work; RIOT shares are down 25% this year). One example is buyout via reciprocal agreement, which is what Coreweave tried to do after it ended its AI deal with Core Scientific. The offer was rejectedBut it is significant that an AI company with growth aspirations looked at a bitcoin mining company and thought, “wait a minute, we need to grow our operations fast before the AI ship passes us by, and bitcoin miners have warehouses that we could adapt for our use, so we should buy them.”
“I think some of these bitcoin companies are sitting on attractive power contracts, and if you’re a massive data center hyperscaler like Coreweave, what’s a few billion dollars to bulldoze a bitcoin mining site and build a new AI data center?” Foxley said. “Sure it would be expensive to acquire, but you’re betting that the longevity of the power contract will pay off both in the multiple you get from being a public AI company and in the revenue you get from just being an AI company.”
Coreweave can’t be the only AI company that thinks this way.
At least that’s what most thought until Marathon (MARA) revealed that it had mined a relatively obscure cryptocurrency called Kaspa from September 2023. Kaspa is, by most measures, a completely random cryptocurrency that just happens to be mineable. Marathon had access to the space and electricity to throw at it, it looked profitable, and so the company did it because a profitable business is a good thing.
“By mining Kaspa, we are able to create a diversified revenue stream from Bitcoin that is directly tied to our core competencies in digital asset processing,” said Adam Swick, Marathon’s chief growth officer, in a statement.
I think the mining of Kaspa, and potentially other coins, is more of a novelty than a real game-changer in the industry, as I doubt another proof-of-work cryptocurrency will ever reach prominence.
But Marathon’s move further highlights the larger point: Bitcoin miners are suffering revenue and profitability losses, and are looking for solutions beyond Bitcoin mining to make up the difference.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.