Bitcoin has risen 7% in the last 5 days. Do you know what that means? Bitcoin mining is back (until Bitcoin price falls again 5% in 5 days, after which Try again).
The surge in bitcoin’s price has caused the stock prices of four of the top five publicly listed miners (measured by total hash rate, or the computing power devoted to securing the bitcoin network) to rise by double-digit percentage points.
The only laggard is Iris Energy (IREN), the fifth largest of the five. A report released by Culper Research last week In it, the firm disclosed a short position in IREN, with Culper making the bearish bet because researchers believe Iris’s Childress, Texas, facility is not well-suited for artificial intelligence (AI) or high-performance computing (HPC).
(Perhaps if the price of Bitcoin continues to rise, the issue of IREN’s sites being unsuitable for revenue-generating activities other than Bitcoin mining could be pushed aside as the company shifts its resources back to Bitcoin mining.)
In any case, “Bitcoin mining is back” does not mean that “Bitcoin Mining Stocks Because, if we think purely from the perspective of “are there more miners now?” Known Pool Hashrates Instead of the expected 7% increase, there has only been a slight increase over the past five days (from 663.618 Exahashes/sec to 668.659 Eh/sec).Note: there is no “perfect” data point for hashrate.) Of course, it’s a good thing for publicly traded companies that their hashrate doesn’t respond immediately and proportionately to Bitcoin price increases.
But if you look into the narrative around bitcoin mining and see what mining companies are saying in interviews and public documents, you’ll see that while they’re still focused on bitcoin mining, they’re also making a fuss about other things that are seemingly unrelated or only slightly related.
Last week, I AI and Bitcoin consume huge amounts of energy Not only that, but it also seems easy to retrofit Bitcoin mining facilities for the next hot thing: AI (or HPC, if you want to avoid the backlash against AI hype).
Investors love this adaptability. By Will Canney and Aoyon Ashraf, CoinDesk“Private equity (PE) firms are finally starting to realize the value of Bitcoin (BTC) miners, thanks to the growing demand for data centers that can power artificial intelligence (AI) machines.”
JP Morgan investigation Suggesting the same, and interestingly, the investment bank’s research suggests that IRENs (companies that Culper deems “AI not ready”) are best positioned to take advantage of this resource shift trend.
Will Foxley, co-founder of Blockspace Media and host of The Mining Pod, expressed skepticism of the claim that bitcoin mining facilities are suitable to transition to supporting AI computing.
“A lot of bitcoin miners just talk about what they can do, but they don’t actually get it done,” Foxley told CoinDesk.
I have argued that before Going public is foolishOne reason is that it forces companies to shift their focus from long-term goals (such as perpetual growth and continuing into the next decade) to short-term, quarterly earnings. Also, if a company is struggling, everyone will know, which can make the company vulnerable.
In 2022, mining companies have struggled. Core Scientific (CORZ) even declared bankruptcy.This was all before Bitcoin came along. Halved by April 2024 Miners’ revenue prospects were severely damaged. It was a tough time for miners in general, but the large number of public mining companies allowed competitors to pinpoint which ones were struggling. Riot Platforms (RIOT) took advantage of the situation and made a takeover offer for the smaller mining company Bitfarms (BITF). Because BITF is a public company, RIOT did not need to call BITF’s management and politely ask for a takeover. Instead, RIOT purchased a large amount of BITF stock in an attempted hostile takeover. This may have worked if RIOT correctly assumed that its operations were better and more efficient than BITF’s, but we don’t know if that was true. The takeover attempt ultimately failed.
There are other financial tricks to boost (or, if that fails, hurt) shareholder returns — RIOT shares are down 25% this year — such as a mutually agreed acquisition, which Coreweave tried after signing an AI deal with Core Scientific. The offer was rejectedBut it is instructive that a growth-oriented AI company looked at a bitcoin mining company and thought, “Hold on a second, we need to rapidly expand our operation before the AI ship passes by. The bitcoin miners have a warehouse that we can adapt for our use, we should buy it.”
“I think some of the bitcoin companies have attractive power contracts, and if you’re a big data center hyperscaler like CoreWeave, how many billions of dollars would it cost to destroy a bitcoin mine and build a new AI data center? Of course, it would cost a lot of money to acquire them, but they’re betting that the longer-term power contracts will pay off based on both the multiples they can get as a public AI company and the revenue they can make as an AI company.”
Coreweave is certainly not the only AI company thinking this way.
At least, that’s what most people thought until Marathon (MARA) revealed that it was mining a relatively obscure cryptocurrency. From September 2023 CasparKaspa is, by most standards, a completely random cryptocurrency that just happens to be mineable. Marathon had the space and power to put into it, and it looked like it could be profitable, so any profitable activity is a good thing, and the company went for it.
“Mining Caspar allows us to generate a diversified revenue stream from Bitcoin that ties directly into our core competencies in digital asset computing,” Marathon chief growth officer Adam Swick said in a statement.
I see mining Kaspa, and possibly other coins, as more of a novelty than a concrete industry change, because I don’t think we’ll ever see another proof-of-work cryptocurrency rise to prominence.
But Marathon’s move further highlights a larger picture in which bitcoin miners are struggling with revenue and profitability and are looking elsewhere to fill the gap.
Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc. or any of its owners or affiliates.
