WHY DID THE BITCOIN MINERS TURN TO AI? THE REASON BEHIND THIS IS AMAZING

This is by♪ Tiger Research ♪Author of a study on the sharp fall in the price of bitcoin that forced miners to change their business model。

Summary of highlights

• Revenue instability and the rising cost of mining bitcoin destabilized the core operations of encrypted mining companies。

• As a result, the encryption company was transformed to lease data centre space from existing mines to large technology companies。

• This reduced intense competition and made the industry more robust。

1. Commercial risks to encrypted mining companies

WE HAD PREVIOUSLY ANALYSED THE FINANCIAL RISKS POSED BY THE FALL IN THE PRICE OF BITCOIN TO THE DIGITAL ASSET RESERVE (DAT). HOWEVER, IT IS NOT ONLY DAT THAT IS UNDER PRESSURE. BITCOIN MINING COMPANIES, WHICH OPERATE MINING OPERATIONS DIRECTLY, ARE ALSO AT GREAT RISK。

The vulnerability of mining companies stems from their simple business model. Income depends almost entirely on the price of bitcoin, which itself is unpredictable. In contrast, costs tend to rise over time。

• Unpredictable income: Corporate income depends entirely on the price of the Bitcoin market。

• Structural cost increasesThe difficulty of mining continues to increase, electricity prices increase and hardware needs to be periodically replaced。

This structure was particularly problematic during the fall in the price of bitcoin. Income fell immediately, while costs continued to rise. Mining companies are in a double situation。

Regulatory risks add another layer of uncertainty. The State of New York in the United States has put forward a proposal to raise the excise tax of mining companies. Most large encrypted mining companies are currently located in relatively loosely regulated areas, such as Texas, with limited short-term impact. Nevertheless, the risks posed by broader regulatory pressures cannot be ignored。

Against this background, mining companies face a fundamental question: is this business model viable in the long term

2. Structural vulnerability of encrypted mining enterprises

Source:♪ Tiger Research ♪

The average cost of digging out a bitcoin as of today is approximately $74,600, almost 30 per cent higher than a year ago. If factors such as depreciation and equity incentives are taken into account, the total cost of production per bitcoin will rise to approximately $130,000。

The current trade price of bitcoin is approximately $90,000, which means that every bitcoin recovered by a mining company would suffer a book loss of about $46,000. This gap highlights the growing disconnect between operating costs and market prices。

Over time, the situation has become more fragile. The difficulty of mining increased significantly in 2025 compared to 2022, while energy regulation in several regions was becoming tighter. These factors reduce the predictability of costs and reduce the structural stability of mining operations。

3. Leases to artificial smart data centres

Source:♪ Tiger Research ♪

As competition in the field of artificial intelligence grows, so does the demand for data centres by large technology firms. However, the construction of the new data centre will take several years. It is unacceptable to wait in a monthly or quarterly competition for artificial intelligence。

Mining companies have identified opportunities arising from this market gap. The facilities they currently operate are equipped with high-performance computing hardware, large power supply and advanced cooling systems. While these facilities cannot be completely renovated overnight, their specifications are highly compatible with the needs of large technology companies. This allows for a relatively rapid transition to artificial intelligence data centres。

• HIGH PERFORMANCE GPUENCRYPTED MINING COMPANIES OPERATE LARGE GPU CLUSTERS THAT CAN BE REUSED FOR ARTIFICIAL INTELLIGENCE CALCULATIONS. NVIDIA GPU IS A COMMON EXAMPLE. BY ADJUSTING THE FACILITIES, THESE ASSETS CAN SUPPORT NEW SOURCES OF INCOME OTHER THAN MINING。

• Electricity infrastructure: Mining companies have access to a grid of hundreds of MW. In a well-regulated electricity market, even where funds are available, access of this size is scarce and difficult to replicate。

• Cooling systemEXPERIENCE GAINED FROM ASCIC OPERATIONS CAN BE WELL APPLIED IN MANAGING HIGH HEAT AI SERVERS SUCH AS H100 AND H200. IN PRACTICE, MANY MINES CAN BE CONVERTED TO AI DATA CENTRES WITHIN SIX TO TWELVE MONTHS。

Source:♪ Tiger Research ♪

Core Scientific is a typical example. The company faced the risk of bankruptcy in 2022, but was successfully transformed into an operation of the Smart Data Centre for Military Workers. Currently, the company operates approximately 200 MW of data centre capacity and plans to expand gradually to 500 MW. This transition from a troubled mining company to a data centre leasing enterprise is a good example of how the use of alternative infrastructure can help businesses to develop steadily。

Other mining companies are following similar patterns. IREN and TeraWulf are also expanding beyond core mining operations. Although they have not yet been fully transformed into data centre leasing companies, they are developing additional business models beyond bitcoin mining。

These initiatives reflect a broader trend. As the profitability of mining decreases, encrypted mining companies are seeking to adapt business models to the age of artificial intelligence. This shift is not so much about growth ambition as about hopelessness。

4. Encrypted mining diversification strategy

The shift of encrypted mining companies from unprofitable mining operations to artificially intelligent data centre operations is not a temporary trend but reflects a rational survival strategy aimed at reallocating capital to more efficient uses。

Such a shift should not be seen as a negative development. Rather, it helps mining companies to establish more stable cash flows. With more stable income, companies can continue to hold bitcoin without having to sell it at lower prices。

This is far from the alternative. Companies with persistent negative cash flows are at risk of bankruptcy and are often forced to sell bitcoin at unfavourable prices. By contrast, data centre revenues allow mining companies to have the flexibility to hold or sell bitcoin, thus achieving strategic transactions. This is more beneficial for companies and the market as a whole。

Not all companies focus on purely data centre leasing. Some companies, such as Bitmine and Catedra Bitcoin, are expanding their operations to the DAT model outside mining。

TAKEN TOGETHER, THESE CHANGES INDICATE THAT THE ENCRYPTED CURRENCY MINING INDUSTRY IS BECOMING MATURE. LESS COMPETITIVE PARTICIPANTS EXIT THE MARKET OR TRANSITION, THUS REDUCING THE PRESSURE ON MINING. AT THE SAME TIME, LEADING FIRMS ARE EVOLVING FROM SIMPLE MINING OPERATIONS TO DIVERSIFIED DAT OPERATIONS。

In fact, weak links are being removed and the overall market structure is becoming more resilient。

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