Bitcoin Miners Expand Operations to AI Data Centers Amid High Costs

Bitcoin miners are diversifying their operations to include AI data centers in an effort to stay profitable despite high infrastructure costs.

Data from Bitinfocharts indicates that the average BTC transaction fee surged to $127 on April 19, the day of the Bitcoin halving, but has since dropped to around $4. This decline in fees and miner revenue has led to significant losses for mining farms. For example, Bitfarms reported a 42% revenue loss in May, with their Bitcoin holdings dropping from 263 BTC ($18.1 million) in April to 156 BTC ($10.7 million) in May.

In addition, miners sold at least 1,200 BTC on June 10, marking the highest daily total in two months. Julio Moreno, Head of Research at CryptoQuant, highlighted signs of Bitcoin miner capitulation.

AI Data Centers: A New Revenue Stream

To offset declining revenues, some Bitcoin miners are partnering with AI businesses to provide necessary infrastructure. Asher Genoot, CEO of Hut 8 Corp., shared that the company launched an AI vertical under a GPU-as-a-service model and secured a customer agreement with a venture-backed AI cloud platform. Hut 8 expects to generate approximately $20 million annually from this new venture.

Ross Gan, Chief Communications Officer at Bitdeer Technologies Group, noted that Bitdeer has incorporated high-performance computing into its offerings, deploying a full NVIDIA DGX SuperPOD with H100 Systems. This setup, which includes 248 H100 GPUs, has enabled Bitdeer to efficiently process large data sets and execute complex computations. As of June 6, 2024, Bitdeer signed multiple client contracts, achieving approximately $0.5 million in revenue.

Former Bankrupt Bitcoin Miner Secures AI Deal

Core Scientific, a Bitcoin miner that emerged from bankruptcy in January, announced a 12-year deal with cloud provider CoreWeave to provide 200 megawatts of infrastructure for AI operations. This project is expected to generate over $3.5 billion in revenue over the contract term, enhancing Core Scientific’s earnings and shareholder value.

Challenges and Investments

Despite the potential profits, not all mining sites are suitable for conversion to AI data centers. Genoot pointed out that the infrastructure and capital requirements for AI workloads are significantly higher than for Bitcoin mining. Hut 8’s success in this transition is attributed to its experience in building and operating complex energy infrastructure.

Jamie McAvity, CEO of Cormint Data Systems, emphasized that AI data centers differ greatly from crypto mining facilities. They require different types of data centers, applications, and hardware, as well as substantial upfront investments. Due to these requirements, Cormint has no plans to implement AI infrastructure at their mining facilities.

AI data centers require a constant, reliable flow of electricity, extensive networking, and superior cooling solutions due to increased rack density. McAvity mentioned that Cormint’s uptime has been affected by higher power prices, making mining less profitable post-halving.