Bitcoin mining profitability decline drives miners to shift computational resources toward AI infrastructure.
Bitcoin and its mining ecosystem presented a mixed picture in recent weeks. The cryptocurrency rose 12% in the past seven days, and the network hash rate hit an all-time high, reflecting record computing power dedicated to securing the network. However, profitability told a different story. Investment bank Jefferies reported that crypto mining was "significantly" less profitable in August, with the average daily revenue per exahash falling by 11.8% from the prior month.
The strain on mining operations traces back to April, when the bitcoin code automatically cut new issuance of the world's largest cryptocurrency in half—an event that occurs roughly every four years to create scarcity. This halving has historically triggered waves of bankruptcies among mining firms suddenly generating much less revenue with the same operating costs. The impact has been severe: Marathon Digital is down nearly 30% in 2024, while Riot Platforms has fallen 53%, even as the price of bitcoin itself is up about 44% for the year. Jefferies noted that North American publicly traded mining firms minted a smaller share of new bitcoin in August compared to July, falling to 19.9% of the total network.
Despite these challenges, mining companies are investing in operational efficiency. Marathon CEO Fred Thiel told CNBC that machines can now hash twice as much as previous models with the same energy use, stating "No need to add sites or power, just upgrade systems." Riot CEO Jason Les remains bullish on bitcoin's future, declaring that "bitcoin is the most sound money in the world" and calling "low-cost mining is an efficient way to get exposure to it."
Some miners are finding relief by diversifying beyond bitcoin. Core Scientific, which emerged from bankruptcy in January, announced an expanded deal worth $6.7 billion with CoreWeave, an Nvidia-backed startup providing graphics processing units for running AI models. Bernstein identified Core Scientific as the best-performing publicly traded bitcoin miner, noting it was the "only one with a material co-location contract with a leading GPU Cloud provider." Core has more than doubled in value since its return to the stock market and now has a market cap of close to $3 billion. CEO Adam Sullivan told CNBC that "Our facilities were developed to be multi-use for not only just bitcoin mining, but also for the transition that we're doing right now to high-performance computing."
If Core executes all of its 700 megawatt capacity allocated to AI and high-performance computing, Bernstein's analysis suggests the company would become the third-largest data center company listed in the U.S. Sullivan emphasized the strategic importance of the near-term window, stating "It's really about the next three years in terms of where the opportunity set truly lies to capture a large portion of the data center market. Every big data center company that exists carved out a niche, just so happens that the niche that bitcoin miners are carving out now are in the largest niche that has ever been found in the data center industry."