Bitcoin Miners Confront Tough Choices: AI Investments or HODLing Amid Halving Impact

Following Bitcoin’s halving in April 2024, mining firms are grappling with significant challenges as their revenues have sharply declined, according to a report by David Pan for Bloomberg News.

The halving event, which occurs every four years, reduces the rewards miners receive for validating transactions, effectively limiting Bitcoin's supply to help control inflation. This adjustment has intensified pressure on miners, who now earn less for each block they mine.

Publicly traded mining companies such as MARA Holdings (NASDAQ: MARA), Riot Platforms (NASDAQ: RIOT), and CleanSpark (NASDAQ: CLSK) are adopting various strategies to navigate this landscape. Some are choosing to hold onto their mined Bitcoin, banking on its future appreciation. This “HODL” strategy reflects a belief that long-term gains will compensate for short-term revenue losses. Conversely, other miners are redirecting resources toward developing data centers for artificial intelligence (AI) applications, aiming to diversify their income sources.

Wolfie Zhao, an analyst at TheMinerMag, suggests that holding Bitcoin allows miners to avoid selling at unfavorable prices while funding their operations through alternative financial avenues such as debt or equity. This approach enables companies to delay losses and potentially benefit from future price increases.

Despite Bitcoin's impressive over 60% price increase this year, firms that have opted to hold their mined Bitcoin have seen their stock prices decline. For instance, MARA and RIOT have experienced stock drops of approximately 18% and 36%, respectively, year-to-date.

In contrast, companies like Core Scientific (NASDAQ: CORZ) and TeraWulf (NASDAQ: WULF), which have pivoted toward AI, are reaping significant rewards. Core Scientific’s stock has surged by 272% this year after securing multi-billion-dollar contracts with AI firm CoreWeave, while TeraWulf’s shares have more than doubled, rising 128% this year due to its shift to AI data centers.

Miners focused on Bitcoin have adapted their operations to better navigate market fluctuations. Major players like MARA and CleanSpark continue to maintain positive gross margins, driven by advancements in mining hardware and optimism for future Bitcoin price recovery. As Bitcoin rebounds from the 2022 downturn, miners are once again pursuing debt financing and issuing shares. Companies like MARA are even emulating MicroStrategy by using raised funds to acquire more Bitcoin, signaling a long-term commitment to the asset.

However, Ethan Vera, COO at Luxor Technology, cautions that this strategy is fraught with risk. If Bitcoin’s price declines, miners could face significant losses and shareholder dilution as operational costs continue to rise.