New research from VanEck has shown that Bitcoin miners are turning to artificial intelligence (AI) and high-performance computing (HPC) to find new ways to make money.
This shift comes as Bitcoin mining faces rising financial challenges and concerns about the long-term future of the network.
Miners are now increasingly using AI and HPC technology to create new revenue streams, according to the head of digital assets research at VanEck, Matthew Sigel.
In a recent post on the social media platform X, Sigel explained how miners are using these technologies to boost their profits through strategic opportunities.
VanEck estimates that by 2027, if 20% of Bitcoin miners’ computing power is used for AI projects, it could generate a net present value of $38 billion.
For comparison, the combined market cap of the Bitcoin mining companies VanEck analysed is currently $19 billion.
The reason for this shift is straightforward. AI projects require a lot of energy, and Bitcoin miners have access to energy infrastructure that can meet these needs.
Sigel explained that “the synergy is simple: AI companies need energy, and Bitcoin miners have it”. This access to power is crucial as the AI/HPC data centre market grows, and power becomes a valuable resource in the near future.
Bitcoin miners also have the large-scale infrastructure required for AI work. This includes cooling systems, secure facilities, and affordable energy.
VanEck’s data showed that Bitcoin miners are in a strong position, controlling a record percentage of Bitcoin’s hashrate and reaching all-time highs in market capitalisation in July.
However, after a market correction in August, Bitcoin mining stocks underperformed compared to the cryptocurrency itself.
Sigel believes that despite this, the market is missing a key story that could double the market cap of these companies, even without any changes to Bitcoin mining profits.
Financial difficulties and centralisation risks
Bitcoin miners have been struggling with financial difficulties due to several factors. One of the biggest issues is the reduction in block rewards, which took place after the Bitcoin halving earlier this year.
Every four years, Bitcoin undergoes a halving event, cutting the block rewards miners receive in half. This year, the reward was reduced from 6.25 $BTC to 3.125 $BTC per block. This cut has put significant pressure on the profitability of mining operations.
In addition to the reduced block rewards, miners are also facing historically low hash prices. Hash price measures miner profitability based on the current Bitcoin exchange rate, block rewards, and the network’s hash rate.
Despite a temporary spike in transaction fees after the halving due to the launch of the Runes protocol, fees have been decreasing, further impacting miners’ income.
Competition among miners is also increasing. Larger mining operations are investing in more specialised hardware to improve their chances of earning block rewards.
This makes it harder for smaller miners to compete and enter the industry. As a result, the Bitcoin mining network is becoming more centralised, which weakens one of Bitcoin’s key strengths—its decentralisation.
Changes in strategy
Bitcoin miners are therefore shifting their strategies in response to these challenges. New business opportunities, including AI, are now being explored.
For example, Texas-based Applied Digital is using its existing infrastructure to move into AI. While Bitcoin mining hardware cannot be directly used for AI computing, the facilities built by miners, such as cooling systems and access to cheap energy, are well-suited for other types of large-scale computing.
At the same time, competition within the industry is heating up. Riot Platforms, the third-largest publicly traded Bitcoin mining company, has increased its ownership stake in rival Bitfarm by purchasing an additional 1 million shares, bringing its total stake to nearly 19%.
Earlier this year, Riot attempted to buy Bitfarm for $950 million, but the offer was rejected. This trend of consolidation and increased competition is becoming more common in the cryptocurrency mining industry.
Another issue facing Bitcoin mining is the centralisation of mining pools. Currently, four major mining pools control over 75% of Bitcoin’s hashrate.
Although joining a mining pool doesn’t necessarily weaken the network, it does pose security risks. Pool operators have access to sensitive data like miners’ IP addresses, which could be exploited in countries with strict surveillance policies, such as China.
China has a significant presence in Bitcoin mining due to its low electricity costs and its control over a large portion of chip manufacturing. Bitmain, a Chinese company, controls 80-90% of the global supply of specialised mining chips, further contributing to centralisation.
The reduction in block rewards raises concerns about how the Bitcoin network can remain sustainable over the long term.
As block rewards continue to decrease, the network will need to rely more on transaction fees to incentivise miners and maintain security. Ensuring the long-term security and decentralisation of the Bitcoin network remains a critical challenge as the ecosystem evolves.
