Are Bitcoin Miners Moving Towards AI Following BTC Compensation?

Following the recent Bitcoin stripping event, the cryptocurrency mining landscape is undergoing significant change according to a recent report by CoinShares.

While the halving will reduce Bitcoin supply growth by 50%, miners will face higher operating costs, leading some to consider alternative revenue streams such as artificial intelligence (AI).

Post-Half Spill: Bitcoin mining costs to reach $53,000

The report highlights the nearly doubling of mining costs, predicting that the average cost of mining will jump from $29,500 to $53,000 per bitcoin. Similarly, electricity costs are expected to rise post-halving from $16,300 to $34,900 per bitcoin mined in the fourth quarter of 2023. These increased costs are prompting mining companies to explore more economically viable options.

Companies like BitDigital, Hive, and Hut 8 are starting to monetize AI technologies, leveraging their computing power beyond cryptocurrency mining. CoinShares noted that TeraWulf and Core Scientific are not only active in the field, but also have plans to expand their AI operations.

“Companies such as TeraWulf and Bitdeer are actively expanding their capacity. Core Scientific, for example, is hosting Coreweave under a multi-year contract. At the same time, BitDigital plans to double its capacity, aiming to reach an annual run rate of approximately $100 million,” the report says.

Read more: What is Bitcoin Half?

Miners Practice Halving: A New Focus on Stranded Energy and AI Tech

James Butterfill, lead author of the CoinShares report, suggests that Bitcoin mining operations may be drawn to areas with unsustainable energy resources. At the same time, investment in AI can be expanded in a stable manner.

This strategic shift will help miners optimize energy costs, improve mining efficiency, and reduce financial burdens by halving when they need to invest in cost-effective hardware.

Fluctuations in hashrate – the combined computational power used in mining and Bitcoin transactions – further complicate the mining landscape. Post-halving forecasts predict that hashrate will eventually grow to 700 exahash by 2025, although an immediate 10% drop is expected as less profitable mining operations go offline.

At the same time, we expect hashrates, which reflect the revenue per unit of hashrate, to decrease.

Systematic adjustments mark this period of transition as miners navigate the new economic realities in half a day. With the integration of AI, mining companies will not only diversify their operations, but also strengthen their resilience against the cyclical nature of cryptocurrency markets.

Read more: Bitcoin Half Cycles and Investment Strategies: What to Know

This combined focus on cryptocurrency and AI could herald a new era in the digital economy, leveraging blockchain technology with machine learning and other AI applications for optimal profitability and innovation.