The Bitcoin (BTC) mining landscape dramatically shifted post-April 2024 halving, which halved block rewards from 6.25 to 3.125 BTC. This critical event compressed the hash price—the revenue miners earn per unit of computational power—forcing major operators to reconsider their traditional business models. Instead of solely relying on volatile transaction fees, many are now forging lucrative partnerships to lease their robust infrastructure to AI and high-performance computing (HPC) tenants.
The Economic Imperative: Why AI?
Recent mega-deals underscore this strategic pivot. Core Scientific committed 500 megawatts (MW) to CoreWeave in an $8.7 billion, 12-year agreement, while Cipher secured a 168 MW contract with Fluidstack for $3 billion over a decade, backed by Google. These agreements prove that the same power inputs for SHA-256 ASICs can yield significantly higher revenue per megawatt-hour when deployed for HPC, crucial for AI operations.
Miners possess unique assets coveted by AI:
- Access to cheap, abundant power.
- Extensive industrial sites near substations.
- Advanced cooling infrastructure.
- Deep operational expertise in maintaining high-uptime data centers.
While Bitcoin mining revenue fluctuates with hash price and BTC’s market value, AI colocation offers contracted, dollar-denominated revenue per kilowatt-month, providing crucial stability. The key metric, margin comparison in dollars per megawatt-hour, currently favors hosting when the hash price is under pressure.
Navigating Volatility with Stable Revenue
Post-halving, the network's security budget (block subsidies + fees) has become more volatile. Hashprice recently fluctuated between $69 and $98 per petahash per day, with fees contributing a modest 1% to 13% of miner revenue. When hash price dips to around $50 per petahash daily, even modern fleets barely operate above water, generating roughly $119 per MWh, leaving just $69 per MWh after a typical $50 per MWh power cost. This narrow margin is heavily influenced by uncontrollable factors like BTC price and network difficulty.
AI hosting provides a compelling alternative: long-term, dollar-denominated contracts that eliminate exposure to Bitcoin's price volatility and fee fluctuations, utilizing the very same physical infrastructure.
Hosting fees, exemplified by Core Scientific's implied $121 per kilowatt-month or Cipher's $149 per kW-month, are significant. The revenue structure often separates hosting fees from power costs, with tenants reimbursing power consumption. This shifts commodity risk to the tenant and transforms miner revenue into a predictable infrastructure-as-a-service model. Rack rates between $120-$180 per kW-month yield facility revenue intensity of $139-$208 per MWh, largely converting to cash flow after operational expenses.
Treasury Policy and Network Effects
This shift has profound implications for miners' treasury policies. Operators like Marathon Digital Holdings and CleanSpark often hold significant BTC reserves. With AI colocation revenue, miners gain a substantial fiat buffer, reducing the need to sell Bitcoin to cover operational expenses like power bills, debt service, and payroll. For a 100 MW site, $15 million annually from AI hosting means less pressure to liquidate BTC, allowing treasuries to remain coin-denominated even during weak mining environments, thereby dampening overall market sell pressure post-halving.
A significant migration of hashrate to AI hosting could lead to a temporary drop in network hashrate. However, Bitcoin’s difficulty retargeting mechanism would adjust downwards, effectively increasing the hash price for remaining miners. This presents a strategic trade-off: capture contracted dollar revenue from AI or maintain Bitcoin exposure for potential upside from BTC price surges or fee market activation (e.g., Runes, Layer 2 solutions). The optimal strategy hinges on a miner’s cost structure, balance sheet, and their outlook on Bitcoin’s fee trajectory.
Risks and the Evolving Landscape
While promising, the pivot is not without risks. Potential shifts in GPU cycles, counterparty risk with less established AI startups, and escalating grid politics (especially in regions like Texas with long interconnect queues) are significant concerns. Miners who commit interconnect capacity to AI tenants might find it challenging to scale back to SHA-256 if Bitcoin's economics dramatically improve. Operators with superior power purchase agreements (PPAs), expandable interconnects, and flexible capital are best positioned to thrive.
The industry is in transition, with companies like Bitdeer, Iris Energy, TeraWulf, and CleanSpark signaling their intent to leverage HPC demand. The strategic challenge isn't whether miners become AI companies, but how they intelligently allocate finite resources—interconnect capacity, power contracts, and balance sheet strength—between competing uses. The most successful miners will likely execute a hybrid strategy, maintaining SHA-256 operations when profitable while expanding AI hosting, preserving agility as market dynamics evolve. Ultimately, Bitcoin mining is transforming from a single-use identity into a versatile, multi-tenant power monetization layer that also secures the blockchain.
Source: CryptoSlate
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