Bitcoin miners might pivot to AI after the halving: CoinShares

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Bitcoin miners may shift their focus towards artificial intelligence (AI) in energy-secure locations following the blockchain’s quadrennial halving, according to a report by digital asset manager CoinShares.

The halving, which occurred on Friday evening, slows the rate of growth in bitcoin supply by 50%, potentially leading miners to seek alternative revenue streams.

CoinShares noted that mining companies such as BitDigital, Hive, and Hut 8 are already generating income from AI, while TeraWulf and Core Scientific have existing AI operations or plans to grow in the space..

“This trend suggests that bitcoin mining may increasingly move to stranded energy sites while investment in AI grows at more stable locations,” the authors wrote.

The halving is expected to result in substantial cost increases for miners, with electricity and overall production costs almost doubling. 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-halving. Miners can try to mitigate these higher costs by optimizing energy costs, increasing mining efficiency, and purchasing better-priced hardware.

Hashrate refers to the computing power required to validate transactions and add new blocks to the Bitcoin blockchain. It is a crucial metric for assessing the strength and security of the blockchain network. A higher hashrate indicates a more secure network, as it becomes increasingly difficult for malicious agents to disrupt the network with a 51% attack. The hashrate is measured in hashes per second, with Bitcoin’s current hashrate at 89 exahashes per second (EH/s).

Hashrate for the Bitcoin network could rise to a rate of 700 exahashes by 2025, according to CoinShares’ forecasts. However, it may drop by 10% after the halving as miners turn off unprofitable machines. The asset manager also expects hash prices to fall after the event to $53/ph/day.

The report highlights how miners are actively managing financial liabilities, with some using excess cash to pay down debt. This strategy could help mining companies navigate the challenging post-halving environment and maintain financial stability.

As the bitcoin mining industry adapts to the new conditions post-halving, the shift towards AI in energy-secure locations may become more pronounced. The potential for higher revenue from AI operations could provide miners with a viable alternative to offset the increased costs associated with bitcoin mining.

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