In April of this year, the fourth Bitcoin halving took place, after which the reward to miners for adding new blocks was halved. Since then, large companies involved in cryptocurrency mining have continued their development, choosing one of two paths.
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Some public miners, such as MARA Holdings, Riot Platforms and CleanSpark, store bitcoins in the hope that the value of the cryptocurrency will increase. Meanwhile, other companies are investing in building data centers to run AI-powered applications. This kind of bifurcation of the industry especially intensified after the next halving.
Let us remind you that a halving is a planned event that is programmed into the network algorithm and occurs approximately once every four years. Miners’ computers perform calculations to confirm transactions on the blockchain. Transactions form blocks, and the miners themselves compete for the right to complete the next block and add it to the blockchain, for which they receive a reward – new bitcoins. After the last halving, the reward amount was reduced from 6.25 to 3.125 bitcoins.
«Given that halvings significantly reduce profit margins, one of the few strategies to retain investors is for miners to hold the bitcoins they mine, betting on future price increases and relying on equity or contract financing. By avoiding immediately selling Bitcoin at a loss, they can keep potential losses unrealized and profit if the market rises,” said Wolfie Zhao, an analyst at research firm TheMinerMag.
With shares of many public Bitcoin miners lagging the cryptocurrency’s gains of more than 60% this year and future mining earnings limited, traders are trying to figure out which strategy will be more successful. At this stage, miners using artificial intelligence receive higher profits.
Dynamics of changes in the value of shares of public miners this year. Image source: Bloomberg
Shares of MARA and Riot, the two largest publicly traded miners that store mined cryptocurrency, are down 20% and 36% respectively this year. At the same time, shares of Core Scientific, which emerged from bankruptcy in January, nearly quadrupled after announcing multibillion-dollar contracts with AI company CoreWeave. The miner is upgrading part of its data centers, equipping them with AI accelerators to power applications based on neural networks. TeraWulf, whose shares have more than doubled this year, is also developing data centers for AI applications. Shares of other miners, such as Iris Energy and Bit Digital, which devote more resources to AI work, tend to rise faster than shares of companies that store mined cryptocurrency.
It remains unclear which of the two strategies will be more profitable in the long term. Although artificial intelligence is all the rage right now, there are already signs of declining interest in the sector. There are also questions about the ability of some miners to join the AI race, as it requires significant capital investment. Against this backdrop, custodian miners have become better at managing digital asset market cycles, so big players like MARA and CleanSpark continue to see profit from their chosen strategy.