Nandini Roy Choudhury, writer
Brief news
- Bitcoin’s network hash rate reached an all-time high, indicating increased miner participation, while the cryptocurrency saw a 12% price increase over the week.
- Despite this, mining profitability has declined, with average daily revenue per exahash down 11.8% in August, leading to financial strain on miners.
- Companies like Core Scientific are adapting by diversifying into high-performance computing, positioning themselves for growth in the evolving data center market.
Detailed news
Bitcoin devotees experienced a week of extremes.
Conversely, the network hash rate achieved an all-time high, and the cryptocurrency experienced a 12% increase in the past seven days. A positive development. The recent high in hash rate indicates that there have never been more miners online, actively securing the network. Hash rate is a term that alludes to the collective computing capacity of all miners in the bitcoin network.
Concurrently, this week’s reading of another critical indicator demonstrated that profitability in the mining sector is becoming more challenging. In August, Jefferies, an investment bank, reported that crypto mining was “significantly” less profitable. Jefferies reported that the average daily revenue per exahash, or income per miner, was down 11.8% from the previous month.
The days of effortless money seem to be in the rearview mirror as bitcoin becomes a more established and even mainstream part of the economy. Since the SEC approved spot bitcoin exchange-traded funds in January, institutional capital has flooded in, and the bitcoin network is more robust than ever. This is due to the vast and decentralized network of miners that secure transactions with the assistance of large banks of machines.
However, a greater number of individuals and their powerful devices are competing for lesser rewards.
The bitcoin code automatically reduced the number of new issuances of the world’s largest cryptocurrency by half in April. This event occurs approximately every four years to produce scarcity. Historically, the halving of revenue has been accompanied by a spate of bankruptcies among bitcoin mining firms, which are now generating significantly less revenue while maintaining the same level of operational costs.
Wall Street is punishing bitcoin miners. Marathon Digital has experienced a roughly 30% decline in 2024, while Riot Platforms has experienced a 53% decline. In contrast, bitcoin’s value has increased by approximately 44% this year.
Jefferies reported that North American publicly traded mining firms produced a lesser proportion of new bitcoin in August compared to July, with a decrease to 19.9% of the total network.. They are continuing to invest in apparatus enhancements, which indicates that efficiency is increasing but economics are deteriorating.
In an interview with CNBC, Marathon CEO Fred Thiel stated that the upgrade cycle has enabled machines to encode twice as much as previous models with the same energy consumption.
“There is no requirement to add sites or power; rather, systems should be upgraded,” stated Thiel.
Despite the challenging economic conditions, Riot CEO Jason Les remains optimistic about the future of cryptocurrency. He stated that “bitcoin is the most reliable currency in existence” and that “low-cost mining is a cost-effective method of gaining exposure to it.”
Not all miners are experiencing the financial strain. Companies such as Core Scientific
In January, the company emerged from insolvency and is currently exploring methods to leverage its extensive infrastructure to facilitate high-performance computing (HPC) and artificial intelligence.
Core announced last month that it has entered into an expanded agreement with CoreWeave, a startup that is funded by Nvidia and is providing the chipmaker with graphics processing units (GPUs) for the purpose of operating AI models. The agreement is valued at $6.7 billion.
Bernstein identified Core Scientific as the most successful publicly traded bitcoin miner in a recent note. He also noted that Core is the sole miner with a material co-location contract with a top-tier GPU Cloud provider, in contrast to other miners that have expanded into AI and HPC.
Since its return to the stock market, Core has experienced a more than doubled in value, and it currently has a market capitalization of nearly $3 billion.
CEO Adam Sullivan of Core stated to CNBC, “Our facilities were designed to be multifunctional, not only for bitcoin mining but also for the transition we are currently making to high-performance computing.”
Bernstein also stated that Core would become the third-largest data center company listed in the United States if it were to execute the entirety of its 700 megawatt capacity assigned to AI and HPC.
“The opportunity set to capture a significant portion of the data center market is primarily focused on the next three years,” Sullivan stated. “It is a coincidence that the niche that bitcoin miners are currently carving out is the largest niche that has ever been found in the data center industry; every major data center company that exists has carved out a niche.”
Source : CNBC News
