AI and Bitcoin mining, an attractive combo for investors

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The Bitcoin mining industry, coupled with the transformations brought about by artificial intelligence (AI), can prove to be an attractive combination for investors. Trader and analyst Alexander J. Poulos believes that The union of both industries can «increase miners' income» of cryptocurrencies. Among the reasons that could favor mining is the halving that took place last April. Since then, each new block issues 3.125 BTC instead of 6.25 BTC, halving the entry of new currency into the marketFor Poulos, the halving is notable because the reduction in block rewards creates a chain reaction where miners must upgrade their equipment or face the risk of obsolescence as block rewards do not cover the cost of energy. “We do not see revenue and profits increasing as miners face a difficult situation after the halving,” the analyst’s report says. Poulos argues that Bitcoin mining can benefit from AI“Some may argue that this is going too far, but I can assure you that it is not,” he notes. Miners look for cheap power sources in remote locations to set up their data centers. Electricity in cities is very expensive, so it is not in their best interest to mine there. For example, a powerful Bitcoin mining machine operating from a home would lose money due to the high cost of electricity.

What does this have to do with artificial intelligence (AI)?

According to Poulos, data centers for AI They need a lot of energy just like Bitcoin mining centersWith that in mind, AI companies could partner with Bitcoin miners to use their existing facilities. That is, use all the infrastructure, networks, labor, and cooling of Bitcoin mining sites to retrofit them with AI servers. This could bring benefits to both industries.

Industrial Bitcoin Mining Farm – Source: Lightfield Studios – The first of these benefits is that AI companies save money by not having to build their own data centers, and the second is that Bitcoin miners get a new source of income and can reduce losses. This was recognized by Teras Kulyk, CEO of the company Sunnyside Digital, who commented at an event that for a Bitcoin miner, these are good opportunities to attract more customers to data centers and thus obtain additional income. An example is the agreement announced last June, by HUT8 (HUT), a company focused on BTC mining, with Coatue, an AI-related company. The partnership is for Building a next-generation AI infrastructure platform. “This investment will accelerate the growth of our data center portfolio and provide access to Coatue’s extensive network of companies and relationships in energy, data centers and artificial intelligence,” said HUT8. Against this backdrop, Poulos believes that The “optimal configuration” is to invest in shares of mining-related companies.

AI deals signed by some of the smaller-cap miners have come out of nowhere, while the largest player by market cap, Marathon Digital (MARA), is down for the year as AI potential appears to have passed them by. Alexander J. Poulos, trader and analyst.

In contrast, trader and financial analyst Mandela Amoussou sees an attractive entry point in MARA shares being on the downside. The company is presenting a solid financial performance, including a 184% increase in its net income during the first quarter of 2024, as reported by BitcoinDynamic. In addition, It was the mining company least affected by the halving in terms of monthly production of Bitcoin, to which technological innovations are added.

Risks to take into account

In his analysis, Poulos mentions that with the recent drop in BTC price due to refunds from the bankrupt exchange Mt. Gox, there are no guarantees that miners will continue to perform well. Furthermore, US spot Bitcoin ETFs are coming off a weak performance last week. “A nasty pullback can occur at any time, inflicting psychological pain and potential losses,” he warns. AI development may also encounter hurdles and there is little guarantee that more hosting deals will be signed. If this does not happen, it may have a major and difficult-to-predict adverse effect on the industry.