Bitcoin Mining's Energy Shift: Power is the New Currency
Bitcoin mining is facing a significant transformation, shifting from a focus on hash rate to the monetization of energy. Executives at the SALT conference in Jackson Hole highlighted the impact of ETFs, increasing power demands, and the potential of AI to reshape infrastructure needs, forcing miners to diversify their revenue streams.
The Evolving Landscape of Bitcoin Mining
The traditional four-year halving cycle, which once defined the industry, is becoming less relevant. According to Cleanspark CEO Matt Schultz, the maturation of Bitcoin as a strategic asset, driven by ETFs, is fueling demand and changing the game.
Diversification is Key
Cleanspark, operating 800 megawatts of energy infrastructure and developing another 1.2 gigawatts, is exploring opportunities beyond proof-of-work. “Our speed to market with electricity has created opportunities such that now we can look at ways to monetize power beyond just bitcoin mining,” Schultz stated.
The Profitability Squeeze
Patrick Fleury, CFO of Terawulf, emphasized the difficulties in maintaining profitability. He estimates that with electricity at five cents per kilowatt hour, it costs around $60,000 to mine a single bitcoin. This leaves very thin margins when factoring in corporate expenses.
The Power Problem
Fleury pointed to the relentless expansion of the network, driven by hardware manufacturers like Bitmain, as a contributing factor. Bitmain's ability to produce mining rigs regardless of demand puts pressure on the entire industry.
Pivoting to Data Centers
Terawulf recently signed a $6.7 billion lease-backed deal with Google to convert mining infrastructure into data center space, showcasing a strategic shift in business model.
Strategies for Survival
Kent Draper, chief commercial officer at IREN, believes in maintaining profitability through low-cost power. Iren operates at 50 exahash, generating a billion-dollar annual revenue run rate. Despite this, they are pausing mining expansion to explore AI opportunities.
The AI Opportunity
IREN is pursuing both co-location and cloud services in the AI sector, recognizing the potential for diversified revenue streams and faster payback periods.
Agility and Balance Sheets
Marathon Digital (MARA) CFO Salman Khan stresses the importance of a strong balance sheet for surviving industry cycles. Marathon holds bitcoin on its balance sheet and recently acquired a majority stake in Exaion, focusing on compute on the edge.
The Future: Beyond Bitcoin?
The panelists agreed that power, not hash rate, is becoming the critical currency. Companies are exploring opportunities to balance electrical grids and monetize stranded megawatts.
Bitcoin's Role in Energy Systems
While AI is gaining traction, bitcoin remains central to their businesses for now. Some believe bitcoin could evolve into a foundational layer for energy systems, balancing power networks rather than just speculation.