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Bernstein: Bitcoin Miners Offer Strategic Advantage in AI Data Center Projects

Ruholamin Haqshanas
Last updated: | 2 min read
Bernstein: Bitcoin Miners Offer Strategic Advantage in AI Data Center Projects

Bitcoin miners are emerging as attractive partners for the construction of artificial intelligence (AI) data centers, benefiting from their available power supplies and operational capabilities.

In a research report, broker Bernstein said recent AI deals, such as Core Scientific’s 12-year agreement with CoreWeave and Coatue Management’s $150 million investment in Hut 8, act as significant catalysts for the sector.

Bernstein initiated coverage of miner Iris Energy with an outperform rating and a $26 price target.

Additionally, the broker initiated coverage of Core Scientific with an outperform rating and a $17 objective.

In early trading, Iris Energy was valued at $13.40, while Core Scientific stood at $9.79.

Bitcoin Miners Secure Substantial Power Supplies

Bitcoin miners have secured substantial power supplies, currently controlling around 6 gigawatts (GW) of power access, with a projected pipeline of up to 12 GW by 2027.

The power capacity allows miners to occupy a favorable position in the “large load power interconnect queue,” enabling potential partners to save time in securing energy supplies.

The analysts at Bernstein note that Bitcoin data centers are well-suited for retrofitting due to their high power density racks, robust cooling infrastructure, and general operating capabilities.

They anticipate that by the end of 2027, around 20% of bitcoin miners’ power capacity will shift towards AI.

Furthermore, Bernstein predicts that the five largest Bitcoin miners in the United States will continue to consolidate their scale and potentially account for approximately 25% of the global Bitcoin hashrate.

This consolidation positions them favorably to explore AI opportunities in the medium term.

Hashrate, which serves as a proxy for industry competition and mining difficulty, plays a crucial role in this context.

As a Bitcoin bull, Bernstein maintains a positive outlook for the cryptocurrency.

The broker forecasts the asset reaching $200,000 by 2025, $500,000 by 2029, and over $1 million by 2033.

Bitcoin Miners Face ‘Capitulation’

It is worth noting that Bitcoin miners are facing a critical phase known as “capitulation” as their profits diminish amidst the recent sell-off in the Bitcoin market.

Miner capitulation occurs when miners reduce their operations or sell a portion of their mined Bitcoin and reserves to sustain their operations, earn yield, or hedge their Bitcoin exposure.

One significant indicator of capitulation is the decline in Bitcoin’s hashrate, which represents the total computational power securing the Bitcoin network.

The hashrate has experienced a substantial 7.7% decrease, hitting a four-month low of 576 EH/s after reaching a record high on April 27.

The similarity between this decline and the post-FTX collapse conditions in December 2022 suggests a potential market bottom.

Furthermore, miners have been significantly underpaid during this period, as indicated by the miner profit/loss sustainability indicator.

Their daily revenues have declined by 63% since the halving, where both Bitcoin’s base block rewards and transaction fee revenue were higher.

The total daily revenues have dwindled from $79 million on March 6 to $29 million at present.

Additionally, the revenue generated from transaction fees now accounts for only 3.2% of the total daily revenues, marking the lowest share since April 8.