Bitcoin Miners Seen as AI Data Center Ally

Bitcoin miners are becoming increasingly appealing partners in developing artificial intelligence (AI) data centers as they benefit from their operational capabilities and available electricity supplies.

Broker Bernstein stated in a research report that recent AI transactions, including Core Scientific’s 12-year agreement with CoreWeave and Coatue Management’s $150 million investment in Hut 8, are substantial catalysts for the sector.

Bernstein initiated coverage of Iris Energy, a miner, with an outperform rating and a $26 price target.

Furthermore, the broker initiated coverage of Core Scientific with an outperform rating and a $17 objective.

Core Scientific was valued at $9.79, while Iris Energy was valued at $13.40 in the early trading session.

Bitcoin Miners Secure Substantial Power Supplies

Currently, bitcoin miners have access to approximately 6 gigawatts (GW) of power, with a projected pipeline of up to 12 GW by 2027. They have secured substantial power supplies.

The power capacity enables miners to secure a favorable position in the “large load power interconnect queue,” thereby enabling potential partners to save time securing energy supplies.

The analysts at Bernstein observe that Bitcoin data centers are well-suited for retrofitting due to their general operating capabilities, resilient cooling infrastructure, and high power density racks.

They predict that approximately 20% of the power capacity of Bitcoin miners will be redirected to AI by the conclusion of 2027.

Additionally, Bernstein anticipates that the five largest Bitcoin miners in the United States will continue to consolidate their scale, potentially accounting for as much as 25% of the global Bitcoin hashrate.

This consolidation positions them in a favorable position to investigate AI opportunities in the medium term.

In this context, hashrate is essential as a proxy for mining difficulty and industry competition.

Bernstein, a Bitcoin supporter, maintains a constructive perspective regarding the cryptocurrency.

The broker anticipates that the asset will reach $200,000 by 2025, $500,000 by 2029, and over $1 million by 2033.

Bitcoin Miners Face ‘Capitulation’

It is essential to acknowledge that Bitcoin miners are currently experiencing a critical phase known as “capitulation,” as their profits have decreased due to the recent decline in the Bitcoin market.

Miner capitulation is when miners reduce their operations or sell a portion of their mined Bitcoin and reserves to maintain their operations, generate a yield, or hedge their Bitcoin exposure.

The decrease in Bitcoin’s hashrate, which denotes the total computational power that safeguards the Bitcoin network, is a substantial indicator of capitulation.

After reaching a record high on April 27, the hashrate has experienced a considerable 7.7% decrease, reaching a four-month low of 576 EH/s.

The similarity between this decline and the post-FTX collapse conditions in December 2022 indicates the potential market bottom.

Additionally, the miner profit/loss sustainability indicator has demonstrated that miners have been substantially underpaid during this period.

Since the halving, their daily revenues have decreased by 63%, even though Bitcoin’s base block rewards and transaction fee revenue were higher.

The total daily revenues have decreased from $79 million on March 6 to $29 million.

Furthermore, the revenue from transaction fees now constitutes only 3.2% of the total daily revenues, the lowest percentage since April 8.