Why Bitcoin Miners Are Turning to AI for Profit

Bitcoin miners are turning their back on cryptocurrency production and heading to AI. With rising energy costs, diminishing rewards for creating bitcoin and a race for data centre space, could mining grind to a halt in the next few years?

Every four years, an event takes place known as a bitcoin halving. It reduces the reward for producing bitcoin and is an inflationary measure. One of these took place in 2024, and it cut the reward in half to 3.125 BTC. Combined with increasing competition for space and power from AI, bitcoin mining is facing some serious threats.

The Problems Facing Bitcoin Miners

Bitcoin has had a great rise in price since the halving event. The bitcoin price chart shows it is currently at $118,428. Over the last few months, it has even broken records, climbing past the $122,000 mark. Many are speculating that with more institutional investment, it can rise even higher. Yet even this phenomenal value, compared to fiat currencies, has not been enough to keep many miners afloat.

Major mining companies were hit hard by the halving event. Riot Platforms saw 53% knocked off its share price, while Marathon Digital lost 30%. In August 2024, US bitcoin miners had created only 19.9% of coins entering the market, down from the July numbers. JP Morgan announced that the hashrate, which is the computational power of production and measures daily revenue, was down 40%.

Further Factors Facing Bitcoin Miners

Yet the halving was not the only issue. Bitcoin miners must use devices known as ASICs. These are expensive and take a lot of power. So does AI, which is increasing in its demand for space and resources. Thus, miners have the devices needed and the infrastructure to power AI, and for some, it is proving more lucrative. As AI companies need huge amounts of equipment, miners are stepping in to fill the void. They are providing their data centres, upgrading their GPUs and giving spare capacity to hungry AI companies.

Core Scientific is one company that has successfully made this switch. In January 2024, it was on the verge of collapse. Yet it managed to come out of bankruptcy and move into AI along with high-performance computing. A $6.7 billion deal was made with CoreWeave, an Nvidia-backed company. This has seen its stock double.

Many former bitcoin miners are now pitted against the heavyweights of cloud provision. They include Hewlett-Packard and Equinix, but even bigger companies with multiple data centres and global reach. They include Amazon, Google, Microsoft and IBM.

Not only does AI need energy, it needs reliable energy that is consistent and efficient. Estimates are that a data centre uses around 10 to 50 times more energy than a standard commercial building. By 2030, 9% of energy produced in the US could be used by data centres. Projections are that the demand for them will have increased by 160% in the run-up to 2030. In comparison, crypto mining uses up around  0.6% to 2.3% of US energy.

Miners Shifting to Rural Locations

Those who have stayed in the bitcoin mining game are increasingly turning to cleaner, renewable energy sources, or at least ones that are cheaper. In many cases, this means a change of location, often to some far-flung places.

Zambia is one place where bitcoin miners can now be found, deep in the bush. The Zambezi River can provide an abundance of cheap, hydroelectric power. At the country’s western tip, bitcoin mines have sprung up, often backed by global companies. Harnessing this power, they are 14 hours’ drive from the nearest city, yet large computers in vans have been set up to use the cheap electricity and turn it into bitcoin.

Profit made by these companies depends on various factors. Firstly is the price of energy that day, along with the fluctuating price of bitcoin. Yet even the cheap power means they can make a profit when its value drops.

Those still operating in the US have increasingly switched to rural locations. Many coal-fired plants here have been transformed into natural gas plants to power mining locations. Unfortunately, this has often caused friction with local communities who are against the noise and possible environmental damage caused.

The Impact of AI Production on Bitcoin Prices

There are no guarantees about the price of bitcoin. However, it is a certainty that bitcoin is becoming more scarce. As a finite supply, these factors essentially mean less of it is being produced. Amidst this, corporations, governments, states and individuals are now buying what is left of the supply. It has begun to vanish from retail exchanges. Bitcoin is getting hard to come by.

Price rises have already been seen as a result. Yet it is not the difficulty in mining that could see Bitcoin’s demise, but the AI that has been encroaching on its space. Combined with quantum computing, many are already predicting that Q-Day could rip open the supply of bitcoin, opening long dormant wallets and making safeguarding bitcoin impossible.

Whales are already selling, and it may be in anticipation of this. Yet bitcoin looks like it still has some way to go. Sentiment remains high and companies still want it, as well as altcoins. There is still life in bitcoin and mining, yet.