The winds of change are blowing through the cryptocurrency mining industry. The highly anticipated halving in April 2024, which halved block rewards, sent shockwaves through the ecosystem. Since then, miners’ daily revenue has dropped by more than 70%. halvingforcing them to look for up-to-date opportunities to secure their profits.
Enter Artificial Intelligence (AI). Encouraged by the success of projects such as OpenAI’s ChatGPT, the demand for AI-based computing is growing. This, combined with potentially higher profit margins compared to Bitcoin mining, makes artificial intelligence an increasingly attractive option for miners.
AI: A beacon of hope in a volatile sea
Companies such as Bit Digital are at the forefront of this, with artificial intelligence already generating almost 30% of their revenues. Other industry players like Hut 8 and Hive are also dipping their toes into the AI pool.
Adam Sullivan, CEO of Core Scientific, said:
“Moving to AI allows us to create a differentiated business model with more predictable cash flows.”
This diversification is crucial given the volatile nature of Bitcoin prices. By implementing artificial intelligence, miners want to reduce their dependence on a single, often unpredictable income stream.
Mass exodus or metamorphosis of miners?
The impact of halving is not circumscribed to diminishing returns. The data suggests potential for upheaval in the mining community. A recent report indicates a significant decline in the Bitcoin network hashrate, a metric that reflects total mining power. This could signal a mass exodus of miners, especially those with less productive rigs who are struggling to stay afloat after reward cuts.
Further confirmation of this theory is the recent flash of the Hash Ribbons metric. This indicator tracks the difference between short-term and long-term hashrate moving averages, with spikes suggesting low mining activity or miners capitulating.
Hedge fund Crypto Capriole Investments interprets this as a potential “tempting Bitcoin buy signal,” suggesting the market may be reacting to a decline mining pressure.
Mining pressure refers to the pressure on cryptocurrency miners to sell their Bitcoins. Miners earn Bitcoin as a reward for securing the network and typically sell it to cover operational costs such as electricity and equipment. When the pressure drops, it often means that miners are less forced to sell their Bitcoins.
Solace for long-term bulls?
Meanwhile, some analysts say institutional investors are showing renewed interest in Bitcoin, taking a “risk-on” approach to their approach. This may indicate growing confidence in the cryptocurrency’s long-term prospects.
Featured image from The Motley Fool, chart from TradingView
