Will AI Push Bitcoin Higher? ⏫
Bitcoin miners’ AI push will send price to $200K: Bernstein. Bitcoin mining facing profitability squeeze. Gold or Bitcoin: what's the future of mining? Miners stole $723M of electricity in Malaysia.
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Will Bitcoin hit $200,000 by next year?
Bernstein says yes!
But with a little help.
Forget about mass adoption or solving world hunger.
There's a new theory for why Bitcoin will moon: Artificial Intelligence.
According to analysts at Bernstein, AI could be the key to sending Bitcoin prices soaring to $200,000 by next year.
Let’s compare Bitcoin mining to the 19th-century ice industry.
Just as ice production inadvertently spurred the development of electrical grids, Bitcoin mining could pave the way for a more robust infrastructure to support AI's immense power demands.
Read: Bitcoin mining in the time of AI
The concept: Miners + AI = Super profit power
A world where Bitcoin mining rigs don't just secure the network, they also power the future of AI.
Here's how it would work
Miners revamp their hardware: Bitcoin miners would retrofit their existing equipment to serve as the backbone for AI data centres.
Win-win situation: This move benefits both parties. Miners gain a new revenue stream by renting out their hardware, while AI companies get access to the reliable power they need.
Repurposing for the future: Existing Bitcoin data centres can be easily adapted for AI purposes. Their high-density racks, cooling systems, and general operational capabilities make them prime candidates for a makeover.
Bitcoin mining is an energy-intensive business.
This volatility can make things tough for miners.
But, AI also requires massive amounts of stable energy.
Many Bitcoin miners have secured long-term, fixed-rate energy contracts.
This makes them highly attractive partners for AI companies struggling with fluctuating energy costs.
Securing reliable power can be a lengthy process.
Bitcoin miners control access to a massive 6 gigawatts (GW) of power currently, with projections to reach 12 GW by 2027.
This "power advantage" can save AI companies valuable time and resources.
Bernstein suggests that AI's rapid development might outpace the construction of dedicated AI data centres.
This is where miners with their existing infrastructure can step in and fill the gap.
Who is the best example?
Core Scientific emerged from bankruptcy. How?
Core Scientific and IREN, both employing a hybrid model of Bitcoin mining and AI data centre operations, received "outperform" ratings from Bernstein analysts.
The analysts highlighted key partnerships between these miners and AI companies as a major catalyst for their decision.
Prime examples: Core Scientific's 12-year deal with CoreWeave, IREN's collaboration with Poolside and Coatue Management’s $150 million investment in Hut 8.
Bernstein assigned a price target of $17 for Core Scientific, reflecting a potential 64% increase.
IREN received a target of $26, signifying a possible 78% upside.
Read: Bitcoin Miners For AI Help? 🆘
Bernstein's predictions
AI Shift Incoming: The report predicts that by 2027, a significant portion (20%) of Bitcoin mining power capacity will be redirected towards AI.
Mining Consolidation: The report suggests that the top five US Bitcoin miners will continue to dominate the market, controlling roughly 25% of the global Bitcoin hashrate (a measure of mining difficulty). These giants are also well-positioned to pivot towards AI in the future.
Bitcoin's Bright Future: Bernstein remains bullish on Bitcoin, forecasting its price to reach $200,000 by 2025, $500,000 by 2029, and $1 million by 2033.
Who else is bullish?
JPMorgan, a major financial institution, is predicting a rebound for Bitcoin in August.
They expect selling pressure from Gemini creditors, the German government, and Mt. Gox to ease up by July's end.
JPMorgan believes creditors won't dump all their recovered Bitcoin at once (142,000 - Mt.Gox).
While lower than expected ($8 billion vs. $12 billion estimate), inflows are still happening.
$100,000 by year-end? Experts say yes.
Matt Hougan (Bitwise) and Anthony Scaramucci (SkyBridge Capital) are confident Bitcoin will hit $100,000 by December.
They see the current sell-offs as temporary blips on the radar.
Block That Quote 🎙️
CEO of Gryphon Digital Mining, Rob Chang
“Bitcoin mining difficulty is something miners should expect and in fact embrace since it would only occur if Bitcoin continues to succeed.”
Increased difficulty is seen as a natural outcome of Bitcoin's growth.
More miners joining the network lead to adjustments to maintain block production time.
“The presence of a Bitcoin miner who uses consistent amounts of power is beneficial for regions where the local area may not have the demand to justify a stable grid.
Gold or Bitcoin?
How do these two store value assets stack up.
Gold: The timeless treasure
Pros: Long history, tangible asset, stable store of value.
Cons: Environmentally destructive extraction, limited upside potential, high production costs.
Bitcoin: The digital dynamo
Pros: Innovative technology, decentralised network, potential for high returns.
Cons: High energy consumption, volatile market, regulatory uncertainty.
Read the verdict: Gold or Bitcoin: What is the Future of Mining?
Bitcoin just halved block rewards, hurting miners. But new features like NFTs (Ordinals) and tokens (Runes) are boosting fees, offering a lifeline.
Some fear these advancements go against Bitcoin's purpose as digital cash. But here's why innovation is crucial:
NFTs and tokens raise transaction fees, potentially replacing lost mining income from halving.
Upgrades could enable Bitcoin to handle NFTs, tokens, and regular transactions seamlessly.
Read: Don’t fossilize Bitcoin
Satoshi Nakamoto’s vision for Bitcoin goes beyond a single chain, and merged mining is the key to unlocking it.
This concept, proposed by Satoshi Nakamoto in 2010, allows miners to secure multiple blockchains simultaneously with minimal extra effort.
Each Bitcoin halving reduces miner rewards. Merged mining offers a way to diversify income without extra hardware.
Read: Don’t forget about merged mining
Bitcoin Mining Squeeze
With falling profits and a declining Bitcoin price, analysts are warning of a potential miner capitulation event.
Transactions on the cheap: Bitcoin transfers are now less expensive, with average fees dropping to $38.69 on July 7th. The lowest point since the COVID-19 peak in 2020.
There's less competition for space in transaction blocks, leading to lower fees. Also, less data being included in transactions translates to lower processing costs.
The cost crunch: The machines they use to generate new Bitcoin are getting more expensive to run. Data shows the average cost of mining a single Bitcoin hit $83,668 in early June, settling around $72,478 as of July 10.
Half of the major miners tracked are estimated to be underwater, spending more to mine Bitcoin than its current market price.
Only the most efficient mining machines are currently profitable, requiring Bitcoin prices to be above $50,000 to break even.
Hashrate Drop: The total computing power of the Bitcoin network has fallen from $70K value to $50K in a month (June 12 - July 12), mirroring a similar decline observed before the 2022 market bottom.
Shrinking Profits: Miner profits have plummeted since the recent Bitcoin halving, which reduced block rewards. Transaction fees, once a decent source of income, now contribute only 3.2% of daily revenue – the lowest since April.
Reserves depleting: As daily revenue dries up, miners are likely selling their Bitcoin reserves to make ends meet. Outflows have spiked to their highest level since May - putting downward pressure on the Bitcoin price.
Despite the fee decline, miners haven't taken a financial hit. Here's why:
Reduced Difficulty: The difficulty of mining new blocks has sunk to its lowest level since March, making it slightly easier to earn rewards.
The lower difficulty is a boon for large mining companies. Their rigs will now be able to mine more Bitcoin with the same amount of computing power.
And the bullish sentiment prevails after 80 days of mining.
In The Numbers 🔢
$723 million
The value of electricity miners in Malaysia STOLE since 2018.
The Malaysian government wasn't having any of it.
The Deputy Minister of Energy Nasrullah Mohd Nasir swung into action.
They seized over 2,000 mining rigs – enough to fill a warehouse – and some of them met a steamrollin' good ending (sorry, we couldn't resist).
These illegal miners not only hurt the state-controlled power company but also strain local resources in affected areas.
Cheating the System: Electricity theft is a common tactic for these miners, who bypass meters or divert power directly from lines. Nasir explains that energy providers have methods to detect unusual consumption patterns, leading to the recent bust.
Mining cryptocurrency itself isn't illegal in Malaysia.
The problem lies in stealing the electricity to power these energy-intensive operations.
This seizure is part of an ongoing effort by the Malaysian government to curb illegal mining.
They're also prioritising renewable energy sources to meet the country's growing power demands.
Registered or bust: Malaysian authorities are also taking aim at unregistered crypto exchanges. Last year, Huobi Global was forced to shut down for failing to comply with regulations. Only a handful of platforms are currently licensed to operate in the country.
The Miners Round-up
Some regions are embracing crypto industry, others are grappling with the challenges.
Some of the bizarre energy situations brewing in the cryptosphere.
Marathon's Finnish heat: Marathon Digital Holdings is using excess heat from Bitcoin mining to warm houses in a town in Finland.
The pilot project, located in the Satakunte region, aims to heat the homes of over 11,000 residents.
The project uses a method called 'district heating' to distribute the heat through an underground network of pipes.
Texas two-step of trouble: Marathon Digital's site manager, David Fischer, has been acquitted of noise violation charges in Texas. Local residents had complained about the noise levels from Marathon's mining site near Granbury.
Over 40 people claimed to have suffered adverse medical conditions due to the noise.
Read: Texas v Miners 🤼♀️
UK's Green Dream? UK-based Bitcoin organisation advocates for Bitcoin mining to support renewable energy grids. Bitcoin mining can utilise spare renewable energy and provide a "completely elastic demand"
It could require zero subsidies from the government and monetise unused energy. Bitcoin mining in Texas already serves as a flexible load for grid demand
Iceland's Icy Quandary: Iceland's crypto industry has a promising future but faces energy challenges.
The country's unique geography offers advantages that have yet to be maximised.
The 2008 banking crisis in Iceland opened people's eyes to cryptocurrencies and blockchain technology.
Iceland's own Satoshi Nakamoto airdropped Auroracoin to the Icelandic people, sparking further interest in crypto.
The Surfer 🏄
MicroStrategy will conduct a 10-for-1 stock split of its class A and class B common stock. The stock split is aimed at making the company's ballooning stock more accessible to investors and employees.
Nigeria's blockchain future depends on local talent, experts say. National Information Technology Development Agency is developing an indigenous blockchain called "Nigerium" to ensure data sovereignty and national security.
Former U.S. President Donald Trump will speak at the Bitcoin Conference in Nashville, Tennessee. He will join fellow candidate Robert F. Kennedy Jr. in targeting crypto voters ahead of a potential rematch with Joe Biden.
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