As we approach the impending halving event, bitcoin miners diversifying their business strategies is becoming a prevalent trend. The halving event will notably decrease their rewards, coupled with the escalating competition due to a rising hash rate. A report by JPMorgan suggests that bitcoin miners are now venturing into the fast-paced world of artificial intelligence (AI), providing high-performance computing services. This shift could potentially turn into a profitable venture for them.
A Shift Towards AI
Miners’ transition into the AI market is believed to be funded, at least in part, by the sale of newly or previously minted bitcoins. The common denominator between crypto mining and AI development, including the training of large language models, is the need for advanced computer chips. In light of this, Applied Digital recently launched an AI cloud service and secured a $460 million deal to host AI cloud computing in its data center. Iris Energy also revamped its strategy around hosting high-performance computing services due to the increasing interest in AI.
Ethereum Miners Joining the Trend
Former Ethereum miners have followed suit, with many now offering high-performance computing services. The transition of Ethereum from a proof-of-work to a proof-of-stake consensus model resulted in a surplus of graphics processing units (GPUs) in the secondary market. The rapidly growing AI sector has created a high demand for high-performance computing, opening a potentially more profitable avenue for utilizing GPUs previously used for Ethereum mining.
Several Bitcoin miners and former Ethereum miners have conducted beta tests, offering high-performance computing services using a small subset of their total GPU fleet. The results indicate high profitability per unit of power consumption, significantly above the profitability from bitcoin mining. With Bitcoin miners having already secured more than 100MW of long-term contracts with their power grids, the revenues from these new ventures could potentially surpass those from Bitcoin mining.
Geographical Diversification
Bitcoin miners are also diversifying geographically, with Russia emerging as a top destination. Power producers in Russia have been struggling due to the ongoing Ukraine conflict and the resulting economic slowdown. This has led to a large energy surplus in Russia. Combined with the country’s colder climate, Russia can offer significantly cheaper energy resources to Bitcoin miners.
Analysts from JPMorgan have previously stated that the upcoming Bitcoin halving could challenge miners with lower rewards and higher costs. Miners with lower electricity costs are expected to fare better post-halving, while those with higher costs may face difficulties.
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