Miners ditch Bitcoin for AI as energy costs surge

Bitcoin miners are bailing on the crypto grind, switching gears to artificial intelligence (AI) as rising energy costs make it harder to turn a profit.

Mining Bitcoin used to be a cash machine, but those days are gone, and AI is becoming the only way to survive in an industry that’s getting squeezed on all sides.

In the last seven days, Bitcoin saw a 12% price jump, and the network’s hash rate hit an all-time high. More miners are online than ever before, which makes mining even tougher.

Jefferies, an investment bank, reported that August saw an 11.8% drop in daily revenue per exahash for miners. In simple terms: the money they’re making is drying up fast.

April brought another blow. Bitcoin’s halving.

This event, which slashes the number of new Bitcoins mined by half, happens every four years and aims to control supply. But for miners, it means earning half the rewards for the same amount of work.

No surprise then that this cut has led to bankruptcies. For giants like Marathon Digital and Riot Platforms, it’s been a brutal year. Marathon’s stock is down nearly 30% in 2024, while Riot has tanked 53%.

Bitcoin itself may be up 44% this year, but that hasn’t saved these companies. In August, North American publicly traded mining companies minted only 19.9% of the total Bitcoin network, down from July.

Yet, some remain hopeful. Marathon’s CEO, Fred Thiel, says newer machines are doubling the hashing power of older models without using more energy. “No need to add sites or power,” he told CNBC.

But even that doesn’t mean profits are pouring in.

Wall Street isn’t giving miners a break either. The publicly-traded companies have invested in tech upgrades to improve efficiency, but the economics aren’t adding up.

Riot’s CEO, Jason Les, remains bullish, calling Bitcoin “the most sound money in the world.” He insists that low-cost mining is the way to go.

Some, however, are playing the long game. Core Scientific, a mining company that came out of bankruptcy in January, is one of the few companies thriving in this disaster.

They’ve moved beyond just Bitcoin and into AI and high-performance computing (HPC). Last month, they struck a $6.7 billion deal with CoreWeave, a startup backed by Nvidia.

The deal lets Core use Nvidia’s powerful GPUs to run AI models. Since its comeback, Core’s stock has more than doubled, and they’ve secured a market cap close to $3 billion.

CEO Adam Sullivan explained that the company’s facilities weren’t just built for Bitcoin mining but for high-performance computing as well.

At press time, Bitcoin was worth $59,854.

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