How AI Drives Bitcoin Mining Profits to $14 Billion a Year: VanEck

According to VanEck, top Bitcoin miners have made $14 billion by leasing 20% of their computing power for AI purposes. These mining operations incurred losses of $335 million in the past year. Diversifying AI isn't something everyone is convinced about.

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Diversification into AI A controversial strategy Crypto market movers What are we studying?

Bitcoin miners can make serious money by tapping into artificial intelligence.

That's according to VanEck head of digital assets research Matthew Siegel and digital assets investment analyst Nathan Frankowitz.

“The synergy is simple: AI companies need power, and Bitcoin miners have it,” he said wrote that In an August blog post.

Conclusion: Assuming the 12 major publicly traded Bitcoin miners dedicate 20% of their energy capacity to AI computation by 2027, they could increase their average annual profits to nearly $14 billion.

That's compared to $335 million in losses realized by bitcoin miners over the past 12 months.

Diversification into AI

Bitcoin mining is a highly competitive business. Miners expend enormous amounts of computing power to maintain the Bitcoin blockchain and are rewarded for their efforts with freshly minted Bitcoin.

This often leaves miners at the mercy of Bitcoin price fluctuations. It's great when cryptocurrency skyrockets, but devastating when it falls.

To deal with crypto's volatility, some mining operations like Hut 8 or HIVE have already started to divert their capital and computational resources for AI purposes.

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The reason bitcoin miners have an advantage, VanEck argues, is that they already have processing power ready to go online for AI purposes, but AI companies seeking computational power need at least four years to build the next facilities.

“The economics are compelling given the time-to-market advantage of having a rebuilt bitcoin mining site versus greenfield power,” Siegel said. NewsRefers to building a facility from the ground up.

Bitcoin miners are now trading at around $4.5 million per megawatt of installed capacity, while some data center stocks are trading at $30 million per megawatt, the report said.

“If equipped with the right power, bandwidth and cooling systems, bitcoin mining sites are ideal for capturing this value for AI cloud services.”

The computational power bottleneck is too severe, says Brian Dixon, CEO of crypto hedge fund Chain Capital News In May, big tech companies will be tempted to acquire entire AI fleets of Bitcoin miners.

“If you're one of these big tech companies, you basically have two options: You find someone like a bitcoin miner who can do the AI computing or you buy data centers,” Dixon said. “You can't build them fast enough.”

“We'll see some of them buying mining companies outright,” Dixon added. “Amazon, Google, these big behemoths in the tech space need this AI compute. There's really no way around it. “

A controversial strategy

Despite the potential benefits, not everyone believes Bitcoin miners are making the right move to AI.

Elliott Chun, a partner at crypto finance strategy firm Architect Partners, said: News Bitcoin miners investing in AI fleets are “taking their eyes off the ball” and making a mistake.

Main reason: The two business models are very different.

“If AI fleets are like data centers that host the Amazons and Googles of the world, you need to have 99.99% uptime,” Chun said. “Bitcoin miners are not used to working in that kind of environment.”