Bitcoin miners stockpile coins to ride out profit squeeze
Jan 08, 2025 - financialpost.com
U.S. bitcoin miners are stockpiling cryptocurrency to navigate tightening profit margins amid rising competition and energy costs. Companies like Mara Holdings, Riot Platforms, and CleanSpark have raised over $3.7 billion since November by leveraging the soaring bitcoin price, which reached $100,000 last month. These funds, often raised through convertible notes, are used to purchase more bitcoin. Despite the price increase, the cost of production has also risen, with CoinShares estimating an average production cost of $106,000 per bitcoin, including depreciation and stock-based compensation. The increased hash rate and energy consumption further pressure miners, prompting some to explore AI-related opportunities or offshore operations.
The industry faces challenges from high energy demands and competition from AI developers, who have greater financial resources. The U.S. Energy Information Agency estimates that bitcoin mining may use 2.3% of the national grid, with Texas being a significant hub. As energy demands rise, miners like Mara plan to offshore operations to regions with surplus energy, such as Kenya and the UAE. Meanwhile, companies like Hut 8 and Core Scientific are pivoting to lease data center capacity to AI hyperscalers, leveraging their existing infrastructure to capitalize on the growing AI market.
Key takeaways:
U.S. bitcoin miners are stockpiling cryptocurrency to withstand tightening margins and high energy costs.
Miners like Mara Holdings Inc. and Riot Platforms Inc. have raised over $3.7 billion to purchase bitcoin, using convertible notes.
The rising hash rate and energy consumption are increasing competition and pressure on miners' profitability.
Some miners are pivoting to AI, leasing data center capacity to AI hyperscalers to diversify and enhance profitability.
