Bitcoin Halving Spurs Shift to AI Mining

CoinShares, in a recent report, suggests a potential shift in the cryptocurrency mining landscape towards artificial intelligence (AI) in energy-secure locations following the recent Bitcoin (BTC) halving event. The halving, an occurrence once every 4 years that reduces the rate of growth in bitcoin supply by 50%, took place recently. According to CoinShares, companies like BitDigital (BTBT), Hive (HIVE), and Hut 8 (HUT) are already tapping into AI for revenue generation. Additionally, TeraWulf (WULF) and Core Scientific (CORZ) either have existing AI operations or plans to expand into the AI sector.

This trend indicates a possible relocation of bitcoin mining operations to stranded energy sites, while investment in AI may concentrate in more stable locations. James Butterfill and his team of authors suggest that miners will face significant cost increases post-halving, with electricity and overall production costs nearly doubling. To counteract these rising costs, mining companies may focus on optimizing energy expenses, enhancing mining efficiency, and investing in more cost-effective hardware.

The report highlights that the weighted average cash cost of production in Q4 was around $29,500, which is projected to increase to approximately $53,000 post-halving. Similarly, the average electricity cost of production in the fourth quarter was about $16,300 per bitcoin, expected to rise to around $34,900 post-halving.

CoinShares forecasts a potential rise in hashrate to 700 exahash by 2025. However, there might be a temporary drop of up to 10% in hashrate following the halving as miners shut down unprofitable machines. Consequently, hash prices are expected to decrease to $53 per terahash per day after the event. Hashrate refers to the total combined computational power utilized for mining and processing transactions on a proof-of-work blockchain.

The report also notes that miners are actively managing financial liabilities, with some utilizing excess cash to pay off debts. This proactive approach suggests that mining companies are adapting their financial strategies to navigate the evolving market conditions. Overall, the report paints a picture of a dynamic and adaptive cryptocurrency mining industry, responding to challenges and exploring new avenues for revenue generation.

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