A Bitcoin sign hangs in the main hall at the Bitcoin 2024 conference at Music City Center on July 26, 2024 in Nashville, Tennessee.
John Cherry | Getty Images
It’s been an extreme week Bitcoin Enthusiast.
On the positive side, the cryptocurrency has risen 12% over the past seven days, and the network hash rate has hit an all-time high. Hash rate refers to the combined computing power of all miners in the Bitcoin network, and the recent high suggests that there are more miners online than ever before and actively securing the network.
At the same time, another key indicator released this week showed that mining operations are becoming increasingly difficult to make a profit from. Investment bank Jefferies wrote in a report that cryptocurrency mining revenues fell “significantly” in August. Jefferies said that average daily revenue per exahash, or income per miner, fell 11.8% month-on-month.
The days of easy money seem to be a thing of the past as bitcoin becomes a more established, even mainstream, part of the economy. Institutional money has been flowing in since the SEC approved a bitcoin spot exchange-traded fund in January, and the bitcoin network is stronger than ever, held together by a vast, decentralized network of miners who securely execute transactions with the help of large banks of machines.
But there are more people, and their more powerful machines, competing for smaller rewards.
In April, Bitcoin’s code automatically halved new issuance of the world’s largest cryptocurrency, an event that takes place roughly every four years to create scarcity. Historically, this halving precedes a wave of bankruptcies for Bitcoin mining companies, who suddenly see significantly less revenue with the same level of operating costs.
Bitcoin miners are taking a beating from Wall Street.
Marathon Digital By 2024, it will fall by nearly 30%. Riot Platform It has fallen 53%. Meanwhile, the price of Bitcoin is up about 44% this year.
According to Jefferies, the percentage of new bitcoin mined by publicly listed miners in North America in August fell compared to July, dropping to 19.9% of the total network, as they continue to invest in equipment upgrades that are improving efficiency but worsening economics.
Marathon CEO Fred Thiel told CNBC that the upgrade cycle allows the machines to produce twice as much hashing power as previous models with the same energy consumption.
“We don’t need to add sites or power, we just upgrade the system,” Teal said.
Riot CEO Jason Leth remains bullish on Bitcoin’s future despite the tough economic times, saying “Bitcoin is the strongest currency in the world” and that “low-cost mining is an efficient way to invest in Bitcoin.”
Not all mining companies are struggling. Core ScientificThe company, which emerged from bankruptcy in January, is looking at ways to use its massive infrastructure to advance artificial intelligence and high-performance computing (HPC).
Last month, Core announced an expanded deal worth $6.7 billion with Nvidia-backed startup CoreWeave, which is offering its graphics processing units (GPUs) for running AI models.
In a note this week, Bernstein named Core Scientific as the best-performing publicly traded bitcoin miner, noting that among miners that have diversified into AI and HPC, Core is “the only one with a substantial co-location agreement with a major GPU cloud provider.”
Since returning to the stock market, Core’s value has more than doubled and it is now worth nearly $3 billion.
“Our facility was developed to be versatile, not just for bitcoin mining, but also for the ongoing transition to high-performance computing,” Core CEO Adam Sullivan told CNBC.
Bernstein added that once Core is up and running with all 700 megawatts of capacity allocated to AI and HPC, the company will become the third-largest publicly traded data center company in the U.S.
“The next three years will really determine where the opportunity to capture a significant piece of the data center market lies,” Sullivan said. “All the existing large data center companies have carved out a niche, but the niche that bitcoin miners are carving out right now is the largest niche the data center industry has ever seen.”
— CNBC’s Talia Kaplan and Jordan Smith contributed to this report.
clock: CoreScientific CEO Adam Sullivan explains why the company adopted AI
