Bitcoin Miners Are Abandoning Crypto for AI – Here’s Why

The Bitcoin (BTC) mining sector has seen a significant shift over the past year. An increasing number of Bitcoin mining companies are now focusing on serving the data storage and computing needs of the artificial intelligence (AI) industry.

Are Bitcoin miners moving to pastures new? Let’s find out.

Table of Contents Table of Contents

1. Key Takeaways
2. Why Are Bitcoin Miners Shifting to AI?
3. Bitcoin Mining vs. AI Computing: Are All Miners Abandoning Crypto?
4. The Bottom Line
5. FAQs
6. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. Why Are Bitcoin Miners Shifting to AI?
3. Bitcoin Mining vs. AI Computing: Are All Miners Abandoning Crypto?
Show Full Guide
4. The Bottom Line
5. FAQs
6. References

Why Are Bitcoin Miners Shifting to AI?

Revenue diversification, higher profit margins, the growth story of the AI industry, and synergies between Bitcoin mining and high-performance computing (HPC) are the key reasons behind this shift.

Synergies Between Bitcoin Mining & AI Infrastructure

What’s working in the favor of Bitcoin miners is the similarities between crypto mining centers and traditional data centers. Both these projects require extensive amounts of energy to function and need efficient cooling solutions and ventilation systems.

This shared synergy allows Bitcoin mining centers to be modified into HPC centers required by the AI industry. Bitcoin mining companies like Core Scientific are doing just that – providing HPC hosting services.

In June 2024, Core Scientific announced that it would modify a part of its infrastructure to host cloud graphics processing unit (GPU) provider CoreWeave’s Nvidia GPU chips for HPC operations.

The Nasdaq-listed Bitcoin miner said:

“We are a hosting provider of choice to our clients because we own our flexible, high-power infrastructure and have a team of highly experienced data center experts who can execute and build rapidly and effectively.”

Bit Digital, on the other hand, has a varied approach where the company offers GPUs for rent to AI customers instead of providing hosting services like rival Core Scientific.

When Bit Digital first announced its AI venture in October 2023, CEO Sam Tabar called it an “excellent expansion of our platform,” once again highlighting the synergies between Bitcoin mining and AI infrastructure.

AI Revenues Protect Miners From Bitcoin Market Downturns

Tabar also mentioned that Bit Digital’s AI-focused business will help provide “a non-correlated income stream” and help the company “weather potential downturns in its core bitcoin mining and ETH staking businesses.”

Bitcoin mining is a cyclic business that is heavily dependent on the market prices of Bitcoin. Adding to the complexity is Bitcoin’s difficulty adjustment where the protocol is coded to make Bitcoin mining more difficult as more miners enter the field.

When you add other uncertainties and complications like Bitcoin halving, crypto regulations, and intense competition in the mining sector, you see the complex landscapes that Bitcoin miners have to navigate.

The new focus on AI will protect miners from Bitcoin market downturns and provide predictable income from an industry expected to experience meteoric growth.

AI Industry Is Too Lucrative to Ignore for Bitcoin Miners

We cannot blame Bitcoin miners for having their heads turned. The AI industry has become too lucrative to ignore.

According to consulting firm PwC, AI is expected to contribute up to $15.7 trillion to the global economy in 2030. For context, this figure is more than the current gross domestic product (GDP) of Germany, Japan, and India combined.

Meanwhile, global investment firm KKR predicted that AI’s enormous appetite for data and processing will shift data center workloads over the next decade. According to KKR, AI accounted for 30% of hyperscale data center workload in 2024. This figure is expected to reach 50% by 2030. KKR wrote:

“Networks of data centers are like a new utility, housing the entire value chain of the digital economy. They support the production of massive amounts of new data, similar to farming and mining in the physical economy; they refine and analyze data to produce something new, like manufacturers, and they help to distribute data across transmission networks, like logistics hubs and warehouses.”

Bitcoin Mining vs. AI Computing: Are All Miners Abandoning Crypto?

So, will Bitcoin miners abandon crypto mining to complete their pivot to AI computing? Learning about the differences between Bitcoin mining and AI computing may be vital to understanding this industry shift.

According to CoinShares Research, the key difference between the two is their energy and internet uptime needs.

CoinShares Research said AI computing requires extremely high uptime (typically 99% or higher), as downtimes can delay the resumption of prior processing activities for extended periods.

Contractual penalties are often agreed upon to prevent these downtimes.

Bitcoin mining, on the other hand, can be powered on and off within minutes to resume operations, making it ideal for locations with less reliable energy.

CoinShares Research added that miners at “energy-secure locations” have shown a growing preference for AI over Bitcoin mining. They wrote:

“Looking ahead, it is conceivable that Bitcoin mining could become predominantly based at energy-insecure stranded energy sites, especially where it can subsidize such energy projects financially. Conversely, miners seeking revenue diversification and potentially higher margins are likely to invest in AI, exacerbating this divergence.”

The Bottom Line

Bitcoin miners are adapting to changing conditions in order to survive and thrive. Just as investor favorite AI play Nvidia (NVDA) changed over the years from catering primarily to the gaming industry to powering AI innovations today, Bitcoin miners could follow a similar trajectory.

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