Bitcoin Mining Is So Back (Except It’s AI Now)

The prices of the shares for the four largest publicly traded Bitcoin miners, as measured by their total computational power on the Bitcoin network, have experienced double-digit percentage point increases due to Bitcoin’s price rise.

As a crypto investor, I can imagine saying: “If Bitcoin’s price keeps climbing, Iren’s sites might no longer be unsuitable for generating revenue through Bitcoin mining. In such a scenario, the company could potentially redirect its resources back towards Bitcoin mining.”

To clarify, when someone says “bitcoin mining is so last year,” they’re actually referring to the revival of the Bitcoin mining stock sector instead. The overall Bitcoin network hash rate has only experienced a slight increase in the past five days, from 663.618 exahashes per second (Eh/s) to 668.659 Eh/s, which is less than the anticipated 7% rise. Keep in mind that there isn’t a definitive hash rate data point. This lag in response from hash rate to Bitcoin price growth benefits publicly-traded mining companies.

If you delve deeper into the Bitcoin mining narrative and examine what mining corporations are expressing in interviews or public records, you’ll notice that although they remain committed to Bitcoin mining, they frequently discuss various unrelated or only loosely connected topics.

And another: Core Scientific Upgraded to Buy From Neutral to Reflect HPC Expansion: B Riley

As a crypto investor, I’ve noticed an increasing number of investors showing interest in the Bitcoin mining sector, following in the footsteps of Core Scientific’s recent deal. JPMorgan’s involvement is another notable addition to this trend.

Financial engineering-as-a-service

I’ve argued previously that taking a company public is not a wise decision for several reasons. One major concern is the need for businesses to adopt a short-term perspective, focusing on quarterly earnings reports instead of long-term objectives such as continuous growth or surviving the next decade. This shift can be detrimental as it may distract from important strategic decisions and goals that are essential for the company’s long-term success. Additionally, going public makes it harder to keep struggles or challenges hidden from the public eye, increasing vulnerability if a company is facing difficulties.

In 2022, mining companies faced numerous challenges, with Core Scientific (CORZ) filing for bankruptcy being one of the most notable setbacks. The upcoming Bitcoin halving in April 2024 further threatened miners’ revenue prospects by reducing their rewards per block. This situation put many mining companies in a precarious position, making it easier for competitors like Riot Platforms (RIOT) to identify struggling businesses.

As a seasoned investor with a keen interest in technology and finance, I’ve seen my fair share of companies scrambling to grow and stay competitive in their respective industries. One strategy that has caught my attention is the pursuit of strategic acquisitions, particularly when it comes to tech firms eyeing established players in other sectors.

Mining other coins

Prior to Ethereum‘s transition from proof-of-work to proof-of-stake, mining companies focused on extracting ether. However, since this shift occurred, these firms now exclusively mine Bitcoin instead.

Most people believed that Marathon (MARA) had only been engaged in mining Bitcoin or other well-known cryptocurrencies until September 2023, when the company unexpectedly disclosed its involvement with Kaspa. This relatively unknown crypto is essentially random and mineable, making it an intriguing yet unconventional choice for Marathon. The company had the necessary resources – space and electricity – to explore this opportunity, and given its profitability, it seemed logical for them to pursue it. After all, profitable endeavors are generally beneficial.

“Through the process of extracting Kaspa, Marathon generates a source of income that differs from Bitcoin and is linked to our essential skills in managing digital asset computations,” stated Adam Swick, Marathon’s chief growth officer.

In my opinion, the mining of Kaspa and possibly other coins isn’t indicative of a significant industry transformation yet, as I believe it’s unlikely that another proof-of-work cryptocurrency will gain substantial popularity.

Marathon’s action underlines a more significant issue: Bitcoin miners are struggling with revenue and profitability, leading them to explore alternatives beyond just mining Bitcoin to compensate.

As a seasoned writer and editor with extensive experience in the cryptocurrency industry, I want to emphasize that the perspectives shared in this article are my own and do not necessarily align with those of CoinDesk or its affiliates. My journey into the world of digital assets has been both exciting and enlightening, and I look forward to continuing to explore and learn from this dynamic field. However, it is important to remember that individual viewpoints can vary widely within the industry, making open-mindedness and respectful dialogue essential components of any meaningful discourse on cryptocurrency and its potential impact on our global economy.