Bitcoin Miners Gain Strategic Edge in AI Data Center Projects: Bernstein Report

Bitcoin miners are becoming valuable partners for building AI data centers, thanks to their ample power supplies and efficient operations.

According to a research report by broker Bernstein, recent AI partnerships, like Core Scientific’s 12-year deal with CoreWeave and Coatue Management’s $150 million investment in Hut 8, are significant drivers for this trend.

Bernstein has initiated coverage of miner Iris Energy with an “outperform” rating and a $26 price target. Similarly, Core Scientific received an “outperform” rating and a $17 target price from the broker.

In early trading, Iris Energy was valued at $13.40, while Core Scientific stood at $9.79.

Bitcoin Miners Command Significant Power Resources

Bitcoin miners control substantial power resources, with access to around 6 gigawatts (GW) of power and a potential increase to 12 GW by 2027.

This power capacity positions them well in the “large load power interconnect queue,” allowing partners to save time on securing energy supplies. Bernstein’s analysts highlight that Bitcoin data centers are ideal for retrofitting due to their high power density racks, robust cooling systems, and overall operational efficiency.

By the end of 2027, Bernstein expects about 20% of bitcoin miners’ power capacity to be used for AI purposes. Additionally, the five largest Bitcoin miners in the U.S. are anticipated to consolidate further, potentially controlling around 25% of the global Bitcoin hashrate. This consolidation enhances their medium-term AI prospects.

Hashrate, indicating industry competition and mining difficulty, is crucial in this scenario.

Bernstein, optimistic about Bitcoin, forecasts its price reaching $200,000 by 2025, $500,000 by 2029, and over $1 million by 2033.

Bitcoin Miners Enter a Phase of ‘Capitulation’

Bitcoin miners are currently facing “capitulation,” a critical phase where profits decline due to the recent Bitcoin market sell-off. Capitulation occurs when miners scale back operations or sell some of their Bitcoin to sustain operations, earn yield, or hedge their exposure.

A key indicator of capitulation is the decline in Bitcoin’s hashrate, which has dropped by 7.7%, reaching a four-month low of 576 EH/s after peaking on April 27. This decline is reminiscent of the post-FTX collapse in December 2022, suggesting a possible market bottom.

Moreover, miners have seen significant underpayment, as indicated by the miner profit/loss sustainability indicator. Daily revenues have fallen by 63% since the halving, with total daily revenues dropping from $79 million on March 6 to $29 million. Transaction fees now account for just 3.2% of daily revenues, the lowest share since April 8.