[Mexico City = Shim Young-jae, Correspondent] As Bitcoin (BTC) prices decline and mining profitability worsens, the gap in corporate value between mining companies that have transitioned to artificial intelligence (AI) and high-performance computing (HPC) and those focused solely on Bitcoin mining is widening significantly. Companies securing AI and HPC contracts are being valued at more than double that of pure Bitcoin mining firms.
According to CoinDesk, on the 18th (local time), the Bitcoin hash price fell to about $31.80 per petahash (PH/s), which is half of last July's $63. The decline in profitability has led to an increase in companies halting their mining operations, resulting in a 21% decrease in the Bitcoin network's hash rate from 1.14 zettahash (ZH/s) to 900 exahash (EH/s).
CoinDesk reports that the transition of Bitcoin mining companies to AI and HPC has been ongoing for several years. The results of this shift have become more pronounced as the Bitcoin bear market continues.
Bitcoin has fallen 45% from its peak over the past eight months. The price drop has pressured the profitability of mining companies.
In contrast, demand for AI computing has surged rapidly.
Bitcoin mining and AI data centers share a significant overlap in core assets. They require long-term access to cheap electricity to operate large computing facilities and must procure and manage efficient equipment while minimizing downtime.
CoinDesk explains that due to these commonalities, Bitcoin mining companies have been able to convert their secured power and data center infrastructure into AI and HPC businesses.
This difference is also reflected in stock prices.
According to CoinDesk, the stocks of TeraWulf, IREN, and Cipher Digital, which expanded into AI and HPC early, have more than doubled over the past year.
In contrast, Marathon Holdings, which transitioned to AI relatively late, has fallen 40% during the same period.
The market is also pricing the two business models differently.
According to CoinShares' Q1 mining report, the enterprise value multiple for mining companies with HPC contracts is 12.3 times. Pure Bitcoin mining companies are valued at only 5.9 times.
This means that companies holding AI and HPC contracts are recognized with a valuation approximately 2.1 times higher than pure mining firms.
CoinShares estimates that the cumulative value of AI and HPC contracts secured by the Bitcoin mining industry reached $70 billion by the end of Q1.
The key variable pressuring companies focused on Bitcoin mining is the hash price. The hash price indicates the expected revenue that a certain mining computational power can generate in a day.
According to CoinDesk, the hash price, which was $63 per PH/s last July, has now fallen to about $31.80. This represents a decrease of approximately 49.5% over the past year.
As mining revenues decline, some businesses are unable to cover their electricity and operating costs and are halting their mining operations.
In the mining industry, the process of miners shutting down their equipment or exiting the market due to worsening profitability is referred to as 'capitulation.'
During this process, the hash rate, which represents the total computational power of the Bitcoin network, has also decreased. CoinDesk reports that the hash rate has dropped from 1.14 ZH/s to 900 EH/s. Since 1.14 ZH/s corresponds to 1140 EH/s, the decrease is approximately 21%.
CoinDesk analyzes that the ongoing capitulation phase for miners is one of the longest in history and may not yet be over.
Mining companies that have transitioned to AI and HPC are securing long-term contracts to obtain revenue sources different from Bitcoin prices.
According to CoinDesk, Riot Platforms recently signed a 20-year lease agreement with Anthropic worth $9.1 billion. Riot's stock price has risen from about $3 to $20 over the past four years.
CoinDesk presents this as an example of the market reassessing the value of Bitcoin mining companies exposed to AI infrastructure.
Another characteristic of AI and HPC businesses is the contract duration. Bitcoin mining revenues fluctuate significantly based on Bitcoin prices, network difficulty, electricity costs, and hash prices. AI data centers can create relatively stable long-term cash flows if they secure long-term contracts.
CoinDesk evaluates that the core value held by mining companies is not only their ability to produce or hold Bitcoin but also their ability to control scarce power and infrastructure.
It explains that the power secured for Bitcoin mining and the experience of operating large computing facilities can be transitioned to other computationally intensive industries that are growing rapidly, like AI.
If Bitcoin recovers to $126,000, the situation could change.
While Bitcoin mining companies' transition to AI has been successful, the possibility of a reversal of the pure mining model still exists.
The variable is the price of Bitcoin. According to CoinShares, if Bitcoin recovers to the $126,000 level recorded last October, the hash price could rise to about $59 per PH/s.
This is approximately 86% higher compared to the current level of about $31.80.
If the hash price recovers to this extent, the profitability of pure Bitcoin mining companies could significantly improve. The computing infrastructure and capital that had moved to AI and HPC could be reassessed for the economics of Bitcoin mining.
Ultimately, the transition of mining companies to AI can be viewed not as a complete abandonment of the Bitcoin business but as a capital allocation issue regarding where to maximize the profitability of power infrastructure.
Currently, the market's choice leans towards AI. The decline in Bitcoin prices and the sharp drop in hash prices have worsened the profitability of pure mining, while AI companies require large-scale power and computing facilities for extended periods.
However, if Bitcoin approaches the $126,000 level again and the hash price recovers to around $59, the choices of mining companies may change again.
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