Bitcoin Mining Is So Back (Except It’s AI Now)

Bitcoin
is
up
7%
over
the
last
five
days.
You
know
what
that
means?
Bitcoin
mining
is
so
back
(until
bitcoin’s
price
falls
5%
over
a
five-day
stretch
again,
after
which
it’ll

be
so
over
again).

With
bitcoin’s
price
surge,
the
stock
prices
of
four
of
the
five
largest
publicly
traded
miners
(measured
by
total
hashrate,
or
computing
power
spent
securing
the
Bitcoin
network)
are
up
double-digit
percentage
points.

The
one
laggard,
Iris
Energy
Ltd
(IREN),
the
fifth
largest
in
this
quintet,
is
down
15%
following
a

report
published
last
week
by
Culper
Research
in
which
the
firm
disclosed
a
short
position
in
IREN.
The
reason
Culper’s
taking
a
bearish
bet:
the
unsuitability,
in
the
researchers’
view,
of
Iris’
Childress,
Texas
site
for
artificial
intelligence
(AI)
or
high-performance
computing
(HPC).

AI
and
HPC
might
seem
unrelated
to
bitcoin
mining,
but
such
diversification
has
become
a
way
for
bitcoin
miners
to
make
money,
as
evidenced
by

Core
Scientific’s
(CORZ)
200
megawatt
(MW)
AI
deal
with

CoreWeave
last
month,
which
pumped
CORZ’s
share
price
by
40%.

(Perhaps
if
the
price
of
bitcoin
continues
its
upward
creep,
the
unsuitability
of
IREN’s
sites
for
non-bitcoin
mining
revenue-generating
activities
can
fall
to
the
wayside
as
the
company
shifts
resources
back
to
bitcoin
mining.)

In
any
event,
what
“bitcoin
mining
is
so
back”
really
means
is
“bitcoin

mining
stocks
are
back,”
because
on
a
pure
“are
there
more
miners
now?”
basis,

known
pool
hashrate
has
only
increased
slightly
over
the
last
five
days
(from
663.618
exahashes
per
second
to
668.659
Eh/s)
rather
than
increase
by
7%
as
one
might
expect.
(Note:
there
is
no
“perfect”
data
point
for
hashrate.)
Of
course,
hashrate
not
reacting
immediately
and
proportionally
to
a
bitcoin
price
increase
is
good
for
the
public
companies.

But
then
if
you
look
into
the
narrative
around
bitcoin
mining
and
check
out
what
the
mining
companies
are
saying,
in
interviews
or
public
filings,
you
find
that,
while
they’re
still
focused
on
bitcoin
mining,
there’s
much
ado
about
other
seemingly
unrelated
or
tangentially
related
things.

Here’s
a
splashy
headline:

Private
Equity
Giants
Are
Circling
Bitcoin
Miners
on
AI
Allure

And
another:

Core
Scientific
Upgraded
to
Buy
From
Neutral
to
Reflect
HPC
Expansion:
B
Riley

And
one
more,
as
good
things
come
in
threes:

Bitcoin
Mining
Sector
Is
Attracting
Growing
Investor
Interest
Following
Core
Scientific
Deal:
JPMorgan

Last
week,
I
wrote
about
how
both

AI
and
Bitcoin
use
a
lot
of
energy
and,
not
only
that,
it
seems
that
it
is
straightforward
for
Bitcoin
mining
facilities
to
be
retrofitted
for
the
next
hot
thing:
AI
(or
HPC,
if
you
want
to
avoid
the
backlash
against
AI
hype).

Investors
like
this
adaptability.

From
CoinDesk’s
Will
Canny
and
Aoyon
Ashraf,
“Private
equity
(PE)
firms
are
finally
seeing
value
in
bitcoin
(BTC)
miners,
thanks
to
the
rising
demand
for
data
centers
that
can
power
artificial
intelligence-related
(AI)
machines.”

Research
from
JPMorgan
suggests
the
same
thing
and,
funnily
enough,
the
investment
bank’s
research
says
that
IREN
(the
company
Culper
deems
“not
ready
for
AI”)
is
best
positioned
to
capitalize
on
this
resource-shifting
trend.

Will
Foxley,
co-founder
of
Blockspace
Media
and
host
of
the
The
Mining
Pod,
expressed
skepticism
about
claims
that
Bitcoin
mining
facilities
are
suitable
to
transition
to
supporting
AI
computing.

“A
lot
of
these
bitcoin
miners
are
just
talking
about
how
they
can
do
AI
when
in
reality
they
aren’t
able
to
do
it,”
Foxley
told
CoinDesk.

I’ve
contended
before
that

going
public
is
dumb.
One
of
the
reasons
is
that
it
requires
a
company
to
shift
to
a
short-term,
quarterly
earnings-focused
mindset
when
long-term
goals
(such
as
growth
into
perpetuity
or
existing
next
decade)
should
be
the
focus.
It
also
makes
it
such
that
if
a
company
is
struggling,
everyone
knows,
which
can
make
a
company
vulnerable.

Mining
companies
were
struggling
in
2022.

Core
Scientific
(CORZ)
even
declared
bankruptcy.
And
this
was
all
before
the
Bitcoin

halving
in
April
2024
cut
deeply
into
miners’
revenue
prospects.
It
was
tough
for
miners
in
general
and,
because
there
are
a
bunch
of
public
mining
companies,
competitors
could
pinpoint
exactly
who
was
struggling.
Riot
Platforms
(RIOT)
tried
to
take
advantage
of
this
situation
and
made
a
takeover
bid
for
a
smaller
mining
company,
Bitfarms
(BITF).
Because
BITF
is
public,
RIOT
didn’t
need
to
call
on
BITF
leadership
and
ask
politely.
Instead
RIOT
bought
a
lot
of
BITF
stock
in
a
hostile
takeover
attempt.
This
could
have
worked
out
well
if
RIOT
was
correct
in
assuming
that
its
operation
was
better
and
more
efficient
than
BITF’s,
but
we
won’t
ever
know
as
the

takeover
attempt
ultimately
failed.

There
are
other
financial
tricks
out
there
that
can
pad
shareholder
returns
(or
tank
them
if
unsuccessful;
RIOT’s
stock
is
down
25%
this
year).
One
example
is
being
purchased
by
mutual
agreement,
which
is
what
Coreweave
tried
to
do
after
it
made
its
AI
deal
with
Core
Scientific.

The
offer
was
rejected,
but
it
is
telling
that
an
AI
company
with
growth
aspirations
looked
at
a
bitcoin
mining
company
and
thought:
“hold
on
a
second,
we
need
to
grow
our
operations
quick
before
the
AI
boat
sails
past
us,
and
bitcoin
miners
have
warehouses
that
we
could
retrofit
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
huge
data
center
hyperscaler
like
Coreweave,
what’s
a
few
billion
dollars
to
go
level
a
bitcoin
mining
site
and
throw
up
a
new
AI
data
center?”
Foxley
said.
“Of
course
the
takeover
would
be
expensive,
but
you’re
betting
that
the
longevity
of
the
power
contract
pays
you
back
based
both
on
the
multiple
you’re
going
to
get
being
a
public
AI
company
and
on
the
revenue
of
just
being
an
AI
company.”

Coreweave
surely
cannot
be
the
only
AI
company
thinking
this.

Mining
companies
used
to
mine
ether
before
Ethereum

shifted
from
proof-of-work
to
proof-of-stake
and
so
now
these
companies
only
mine
bitcoin.

At
least
that
was
what
most
thought
until
Marathon
(MARA)
revealed
it
had
been
mining
a
relatively
obscure
cryptocurrency
called

Kaspa
since
September
2023.
Kaspa
is,
by
most
measures,
a
completely
random
crypto
that
just
so
happens
to
be
mineable.
Marathon
had
access
to
space
and
electricity
to
throw
at
it,
it
seemed
profitable,
and
so
the
company
did
it
because
profitable
activity
is
good.

“By
mining
Kaspa,
we
are
able
to
create
a
stream
of
revenue
that
is
diversified
from
Bitcoin,
and
that
is
directly
tied
to
our
core
competencies
in
digital
asset
compute,”
said
Adam
Swick,
Marathon’s
chief
growth
officer,
in
a
statement.

I
think
the
mining
of
Kaspa,
and
potentially
other
coins,
is
more
a
novelty
than
a
concrete
industry
shift,
because
I
doubt
another
proof-of-work
cryptocurrency
will
ever
rise
to
prominence.

But
Marathon’s
move
further
highlights
the
broader
point:
Bitcoin
miners
are
hurting
for
revenue
and
profitability,
and
they
are
looking
in
places
besides
mining
bitcoin
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.