Bitcoin miners are turning some of their computing power over to AI. Skeptics argue that this is a mistake because AI and Bitcoin mining are very different businesses.
Bitcoin miners must commit to mining Bitcoin.
According to Elliott Chun, a partner at crypto finance strategy firm Architect Partners, Bitcoin miners have argued against efforts to bolster their revenue streams by leasing processing power to artificial intelligence.
“When companies set out to do one thing well, and suddenly announce they're doing something else — well, other things get them into trouble,” Chun said.
Shifting into AI means miners “taking their eyes off the ball”.
The comments came amid a sharp sell-off on Monday that hit technology stocks hard Wall Street grows more skeptical Belongs to the sector.
Hit by low Bitcoin prices and changing revenue dynamics, miners have piled into AI to shore up their balance sheets.
Hut 8 is one of them. Miner started diversifying into AI in 2023. And it says it is relentless in that mission.
“Our strategy cannot and will not change based on market hype,” says Hut 8 CEO Asher Genoot News.
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“High-quality energy assets will become more valuable as compute applications demand more energy,” he says. “So we'll be very focused on building and transforming our development pipeline.”
Why is that wrong?
While both AI and mining require high computational power, the business models are very different.
One of the value propositions for Bitcoin miners is that they can switch off their machines at any time without loss – which makes them attractive in jurisdictions with unstable power grids like Texas.
But AI planes are unlikely to work the same way.
“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. “But Bitcoin miners are not used to working in that kind of environment.”
Chun also said that diversifying into AI is expensive.
Organizations need physical space and machinery and only large companies can handle both types of operations.
Splitting the data center in two — one half for bitcoin mining and the other half for AI computation — would be “difficult,” he said.
He is not the only bearish in thought.
Investment firm Culper Capital shorted bitcoin miner Irene in July. The main reason? According to Culper, the company is expanding into AI, but lacks the necessary infrastructure.
Irene's AI diversification is a “fanciful, nonsensical pivot reminiscent of Covid-19-era biotech scams,” Culper has been posted On X.
Mike Power, director of investor relations at Irene, declined to comment.
AI Pivot
Hut 8 and Hive are two of the largest mining operations that have now expanded into AI.
Genute said News That his company is well prepared for diversification. But not all miners who attempt the same pivot will be successful, he said.
According to him, Hut 8 has a leg up. It has a mature computing business and experience in building, managing and commercializing data centers.
The company bought $40 million worth of graphics processing units, or GPUs — computers capable of performing high-speed calculations — in October 2023 specifically for AI purposes.
said Mike Ho, Hut 8's Chief Strategy Officer News Hut 8 won't be repurposing any of its current Bitcoin fleet towards AI — instead preferring to “deploy the latest generation of technology” for that purpose.
Meanwhile, Hive CEO Aydin Kilic said News The company has repurposed a little more than 10% of its existing GPUs for AI computing tasks.
Hive expects its AI fleet to bring in $100 million in revenue by 2025. The company has $121 million in total revenue in 2023.
Difficulty 2024
Chun's skepticism comes as bitcoin miners face profitability problems.
Mining Bitcoin is not easy.
Most operations get more revenue from rewards that increase when the price of Bitcoin rises, but things get difficult when the cryptocurrency falls.
Mining operations have come under further pressure due to the so-called halving in 2024, which halves the amount of bitcoin they receive to produce new blocks.
In some cases, miners have cut their income in half, but operational costs have remained the same.
Tom Carreras is a market correspondent at News. Got a tip about Bitcoin mining and AI? Reach [email protected]
Related TopicsBitcoin Mining Artificial Intelligence (AI)
