Six months after the Bitcoin network’s halving event, cryptocurrency miners are faced with two divergent paths: hold on to their Bitcoin in hopes of future price surges or pivot towards artificial intelligence (AI) by developing data centers for high-performance computing. The halving, which occurred in April, cut Bitcoin mining rewards by 50%, squeezing profit margins and forcing miners to rethink their strategies.
Major public miners such as MARA Holdings, Riot Platforms, and Cleanspark have chosen to hold their Bitcoin, anticipating a rise in its value. These companies are betting that a future bull market will turn their mined Bitcoin into significant gains. “With the halving significantly squeezing profit margins, one of the few strategies available to retain investors is for miners to hold onto the Bitcoin they’ve mined,” said Wolfie Zhao, an analyst at Theminermag. This strategy allows miners to avoid selling at a loss, keeping potential losses unrealized while they rely on equity or debt financing.
At the same time, an increasing number of companies are redirecting their resources towards AI, capitalizing on the growing demand for data centers that power AI applications. The industry bifurcation has become more pronounced as traders speculate on which path will prove successful. AI-focused companies like Core Scientific and Terawulf have seen their shares surge after making significant investments in AI infrastructure. Core Scientific, which emerged from bankruptcy earlier this year, has seen its stock nearly quadruple after announcing contracts with AI firm CoreWeave. The company plans to retrofit its data centers to support AI operations, signaling a shift towards a more diversified business model.
Other miners such as Iris Energy and Bit Digital have also embraced AI, seeing their shares trend higher than some of their peers who continue to rely solely on Bitcoin mining. The AI boom has provided these companies with a new revenue stream, but there are concerns about whether Bitcoin miners have the resources and commitment to fully integrate into the AI sector, as it requires significant capital investment.
MARA and Riot, two of the largest publicly traded Bitcoin miners, have seen their shares slump by 20% and 36%, respectively, this year. Known as “hodlers” in the industry, these companies are holding onto their Bitcoin rather than selling it, banking on a future price surge. “In a rising Bitcoin price environment, it is going to be an extremely successful strategy,” said Ethan Vera, chief operating officer at Luxor Technology. “But it’ll be a disaster if Bitcoin prices plummet.”
Despite the uncertain future, analysts believe there is still a place for pure-play Bitcoin mining. Advances in hardware efficiency and the potential for Bitcoin appreciation offer reasons for optimism. Paul Golding, a senior analyst at Macquarie Capital USA, noted that companies like MARA and Cleanspark continue to operate with positive gross margins, even after the halving. “Our view is that pure-play Bitcoin mining has a place in the market currently with respect to generating economic value from growing capacity to mine Bitcoin,” Golding said.
As Bitcoin prices recover following the 2022 market collapse, miners have resumed borrowing and issuing shares to fund their operations. Some, like MARA, are even using proceeds to purchase additional Bitcoin, a strategy popularized by MicroStrategy, which transformed itself into a prominent Bitcoin proxy.
However, the risks remain. “You will continue to see negative profits, and they are hiding how bad the industry is right now by diluting shareholders and buying newer machines,” Vera warned. With the cryptocurrency market as volatile as ever, the future of Bitcoin miners remains uncertain. Whether holding Bitcoin or embracing AI will prove to be the winning strategy, only time will tell.
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