Bitcoin Mining: AI Power Demand Sparks Institutional Interest
AI's Thirst for Power Drives Institutional Bitcoin Mining Investment
Bitcoin mining companies are facing increasing competition from artificial intelligence (AI) data centers for access to affordable and sustainable energy. This power struggle may lead to renewed institutional investment in the Bitcoin mining sector over the next decade, according to a recent report by GoMining Institutional.
AI data centers, backed by substantial capital, are starting to outbid Bitcoin miners for crucial power infrastructure. This dynamic is forcing some miners to reassess their operations, with some being "priced out" or scaling back mining activities. The GoMining Institutional report highlights this shift, noting the growing pressure on miners.
However, Jeremy Dreier, managing director at GoMining Institutional, points out that Bitcoin miners possess the flexibility to operate in off-grid locations with limited high-speed internet, an advantage over AI facilities. This adaptability could prove crucial in the long run.
Dreier believes this competition for energy will spur a fresh influx of institutional capital into Bitcoin mining. He stated, "In the next five to 10 years, because of this new battle with AI, we’re going to see a new heyday for Bitcoin mining because we now have real institutional capital coming into the space."
Institutions Eyeing "Virgin" Bitcoin
The report suggests that institutional investors are exploring direct investment in Bitcoin mining operations as a way to acquire Bitcoin at a lower cost compared to purchasing it on exchanges. This drive for cheaper, "virgin" Bitcoin is a key factor driving the potential investment wave.
Dreier notes an increase in inquiries about Bitcoin mining infrastructure services from institutions looking to secure Bitcoin for their balance sheets at a more favorable price than spot market rates.
Data from TheMinerMag indicates that mining a Bitcoin cost approximately $64,000 in Q1 2025, with projections exceeding $70,000 by year-end. Even with these costs, mining remains significantly cheaper (around 70% less) than buying Bitcoin at the current spot price of over $119,050.
The competition for electricity has also prompted some Bitcoin mining firms to diversify their operations. For example, Riot Platforms is exploring AI opportunities at its Corsicana, Texas site instead of expanding Bitcoin mining. Similarly, Iris Energy is shifting focus toward its AI cloud business.
Despite some miners pivoting to AI, Dreier anticipates that many public miners will eventually return to Bitcoin mining as they witness the influx of institutional capital. Furthermore, companies like Block Inc. are innovating in mining technology to reduce operation costs and improve efficiency, potentially boosting miners' profitability.