A bitcoin sign is seen in the main hall during the Bitcoin 2024 conference at the Music City Center on July 26, 2024 in Nashville, Tennessee.
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It was a week of extremes for bitcoin enthusiastic.
On the plus side, the cryptocurrency is up 12% in the past seven days and the network hash rate has reached an all-time high. The hashrate refers to the collective computing power of all miners on the bitcoin network, and the recent high suggests that there have never been more miners online, actively securing the network.
At the same time, another key metric this week showed that it’s getting harder to make money in the mining industry. Investment bank Jefferies wrote in a report that crypto mining was “significantly” less profitable in August. The average daily income per exahash, or income per miner, was down 11.8% from the previous month, Jefferies said.
As bitcoin becomes more of an established, and even mainstream, part of the economy, the days of easy money seem to be in the rearview mirror. Institutional funds have flowed in since the SEC approved spot bitcoin exchange-traded funds in January, and the bitcoin network is stronger than ever, held together by a vast and decentralized network of miners who secure transactions with the help of large machine banks.
But more people – and their powerful machines – claim smaller rewards.
In April, the bitcoin code automatically halved the new version of the world’s largest cryptocurrency, an event that occurs roughly every four years to create scarcity. The halving historically precedes a wave of bankruptcies among bitcoin mining companies, which are suddenly generating much less revenue with the same level of operating costs.
Bitcoin miners are getting hammered by Wall Street.
Marathon Digital decreases by almost 30% in 2024, while Riot Platforms has dropped 53%. The price of bitcoin, meanwhile, is up about 44% this year.
Jefferies said North American listed miners mined a smaller share of new bitcoin in August compared to July, falling to 19.9% of the total network. They are still spending on equipment upgrades, which means efficiency is improving but economics are getting worse.
Marathon CEO Fred Thiel told CNBC that because of the upgrade cycle, the machines can hash twice as much as previous models with the same power consumption.
“You don’t need to add sites or power, just upgrade the systems,” Thiel said.
Riot CEO Jason Les is as bullish as ever on the future of bitcoin despite tough economic conditions. He said that “bitcoin is the soundest money in the world” and “low-cost mining is an efficient way to get exposure to it.”
Not all miners are feeling the pinch. Companies like Core Scientificwhich emerged from bankruptcy in January, are finding ways to use their massive infrastructure to power artificial intelligence and high-performance computing (HPC).
Last month, Core announced an expanded $6.7 billion deal with CoreWeave, an Nvidia-backed startup that supplies the chipmaker’s graphics processing units (GPUs) to run AI models.
In a note this week, Bernstein singled out Core Scientific as the best-performing bitcoin miner, noting that of the miners that have diversified into AI and HPC, Core is “the only one with a hardware co-location contract with a leading GPU Provider Cloud.”
Core has more than doubled in value since its return to the stock market and now has a market capitalization of close to $3 billion.
“Our facility was developed to be multi-purpose not only for bitcoin mining, but also for the transition we’re currently making to high-performance computing,” Core CEO Adam Sullivan told CNBC.
Bernstein added that if Core executes all of the 700 megawatts of capacity allocated to AI and HPC, it will make the company the third-largest US-listed data center company.
“It’s really about the next three years in terms of where the opportunity really is to capture a large portion of the data center market,” Sullivan said. “Every major data center company in existence has created a niche, it just so happens that the niche that bitcoin miners are carving out now is the biggest niche that has ever been found in the data center industry.”
— CNBC’s Talia Kaplan and Jordan Smith contributed to this report.
CLOCK: Core Scientific CEO Adam Sullivan on why the company has embraced AI
