Crypto Miners May Shift to AI After Bitcoin Halving

Last Updated on April 23, 2024 by SPN Editor

In the ever-evolving world of cryptocurrency, a significant shift is on the horizon. According to a recent report by CoinShares (CS), crypto miners may shift towards artificial intelligence (AI) in energy-secure locations following the Bitcoin (BTC) halving. This move is driven by the potential for increased revenue.

The Bitcoin halving, a quadrennial event that reduces the growth rate of Bitcoin supply by 50%, took place on a recent Friday evening. This event has profound implications for the crypto mining industry, particularly in terms of cost and efficiency.

Following the Bitcoin halving in 2024, which reduced mining rewards by 50%, crypto miners revenue saw a notable shift. Post-halving, revenue soared to a record $106.7 million, predominantly fueled by network transaction fees, constituting 75.444% of the total. This marks a departure from the traditional reliance on block rewards, as recent programming advancements have fostered a burgeoning ecosystem of projects leveraging Bitcoin’s blockchain, thereby bolstering transaction fee income. The halving’s immediate impact is keenly felt by crypto miners, who witness a halving of block rewards, prompting potential shifts in industry dynamics.

Moreover, the halving intensifies Bitcoin’s scarcity, potentially exerting long-term upward pressure on its price. Nevertheless, the correlation between halving events and price appreciation is multifaceted, subject to diverse market influences. Notably, the advent of U.S. spot bitcoin exchange-traded funds (ETFs) has significantly altered pricing dynamics. In essence, the 2024 Bitcoin halving heralds a significant revenue model transformation for crypto miners, emphasizing the increasing importance of transaction fees and technological integrations.

Crypto Miners Using AI

Several mining companies, including BitDigital (BTBT), Hive (HIVE), and Hut 8 (HUT), are already reaping the benefits of AI. These companies have successfully integrated AI into their operations, generating substantial income. Simultaneously, TeraWulf (WULF) and Core Scientific (CORZ) have existing AI operations or are planning to expand into this promising field.

The report, led by James Butterfill, suggests a trend where Bitcoin mining may increasingly relocate to stranded energy sites, while investment in AI grows at more stable locations. This shift represents a strategic response to the changing landscape of the crypto mining industry.

However, the Bitcoin halving event also presents challenges. Crypto miners will face substantial cost increases, with electricity and overall production costs almost doubling. The weighted average cash cost of production in Q4 was approximately $29,500; post-halving, it is projected to soar to about $53,000. Similarly, the average electricity cost of production in the fourth quarter was about $16,300 per Bitcoin, which is expected to increase to around $34,900 post the Bitcoin halving.

To mitigate these higher costs, mining companies can optimize energy costs, increase mining efficiency, and invest in better-priced hardware. These strategies can help maintain profitability in the face of rising expenses.

Looking ahead, the asset manager’s forecasts suggest that the hashrate could rise to 700 exahash by 2025. However, it may drop by 10% after the halving as crypto miners turn off unprofitable machines. Hash prices are expected to fall after the event to $53/ph/day. The hashrate refers to the total combined computational power used to mine and process transactions on a proof-of-work blockchain.

In conclusion, the intersection of cryptocurrency and AI represents a new era in crypto mining. As the industry navigates the challenges and opportunities presented by the Bitcoin halving, the integration of AI into mining operations could be a game-changer, offering a path to increased revenue and efficiency.