Bitcoin Miners Pivot To Other Areas In Quest To Diversify Earnings: JP Morgan

David Pokima
Last updated: | 2 min read
Source: Pixabay

Digital asset miners are moving to other business ventures including offering high-powered technology services to artificial intelligence (AI) companies to improve earnings.

A new report from JP Morgan shows that crypto-based mining firms are expanding their operations to include high-performance computing, reducing their dependency on core primary operations, cryptocurrency.

The bank noted that while Bitcoin (BTC) miners lead the number of cryptocurrency miners transitioning up AI, other asset miners like Ethereum (ETH) also add to the surging figures. 

As a result of the Ethereum Merge which saw the network transition to a Proof-of-Stake blockchain, with users staking assets to secure the network, miners began selling their high-earned hardware in the secondary market leading to a high supply and a slight drop in prices. 

It should be stated that while most miners pivoted out of the industry, others preserved their equipment to mine other Proof-of-Work (POW) assets although it was not as profitable as mining Ether. 

However, mining these cryptocurrencies was not as profitable as mining ether due to their lower market caps and questions about their long-term viability.”

Nikoloas Panigirtzoglou, an analyst at JP Morgan argued that AI has opened a new phase for former Ethereum miners fueled by the demand for high-performance computing.

“With the rapid growth of AI, the increased demand for high-performance computing is now opening a new and perhaps more profitable avenue for utilizing GPUs previously used for ether mining.” 

Several mining firms have changed their names to reflect the growing diversification trend with Riot Blockchain changing its name to Riot Platforms and Hive Blockchain Technologies now known as Hive Digital Technologies.

A new economy for blockchain firms

A major factor for the switch in digital asset mining firms to AI is added profitability. According to the research report, several mining firms have conducted beta tests by offering HPC services to firms with a part of their equipment. 

Results from these tests show that offering HPC services to AI firms appears to be more profitable than mining Bitcoin because of the high energy intensity of the latter.

“If the profitability reported in beta tests is able to be repeated on a large scale it would overshadow in the future the revenues coming from bitcoin mining at the moment,” the report reads.

The dreaded crypto winter of 2022 is another factor that sparked the need to diversify earning streams. Last year, digital assets hit lows not recorded in several years as multiple assets including BTC and ETH lost over 55% of their values.

As a result, most miners were stretched beyond their capacity in what was termed “miners in the woods” by most observers leading to the sale of their BTC reserves and turning to new sources to stay afloat.

The resurgence of the market this year gave miners a new lifeline coupled with the strong indications of potential approval of a spot BTC ETF by the Securities and Exchange Commission (SEC) which will positively affect the prices of assets.

Last month, JP Morgan wrote that the next Bitcoin halving in 2024 will be a stress test for the industry as “it would reduce the issuance rewards from 6.25 to 3.125 BTC, implying a reduction in miners’ revenue, effectively increasing Bitcoin’s production cost at the same time.”